Digital Surety Bonds

Unleashing the Power of Data Standards

Under the leadership of trade groups like the Construction Progress Coalition, ConsensusDocs, XBRL US, along with the Department of Energy and many others machine readable data standards have been established for the ecosystem of stakeholders involved in construction.

Transitioning to digital surety bonds for the efficiency it provides, the data analytics it enables, and the reduced cost over traditional manual processes and procedures is here.

The workflow is basically the same as paper bonds, but instead of hours of manual preparation, the expense of delivery and the data locked in an image, online systems can now accomplish at a fraction of the time with limited expense and data that be unleashed by every stakeholder.

Welcome to digital surety.

Learn More

K. Dixon Wright

Senior Vice President - Surety

USI Insurance Services LLC

201 Mission Street

Suite 1100

San Francisco, California 94105

CA DOI 0G11911

415-717-1092

Dixon.Wright@USI.com

www.usi.com

Distinction Between Paper Bond, Electronic Bond and Digital Bond

Paper Surety Bond

Issued manually with wet signatures for each person signing the bond.

Data extracted manually or by OCR with potential errors.

Time to complete:

Surety Broker 30 - 45 Minutes to prepare
Principal: 20- 30 Minutes to prepare
Obligee: 20 - 30 Minutes to validate

Total - Over one hour

Process for issuance

The surety bond form is completed by filling in blanks on the form before printing.
The person manually executing the bond provides a wet signature
The person manually executing the bond provides evidence they are authorized by a manually prepared power of attorney form confirming the authority level.
A separate manually completed notary confirms the person executing the bond was verified as the person executing the bond.
The original bond is mailed to others that need to add their wet signature and similar evidence of authority to execute the surety bond form.

The receiver of the bond needs to confirm:

Bond form is completed accurately
Power of attorney is completed accurately
Limit of authority is consistent with the bond amount.
Notary for accuracy and consistent with person executing the bond
Surety is licensed in the jurisdiction
Surety has an acceptable BEST rating
Surety has an acceptable T-List for the bond amount.
As an extra step some bonds require additional wet signatures as witnesses.

Validation

One the bond review is complete the receiver needs to validate the bond by manually contacting the surety or by submitting a manually prepared form to the surety

Electronic Surety Bond

Issued manually with digital signatures for each person signing the bond.

Digital signatures provided by companies like DocuSign, JotForm, HelloSign, PandaDoc, Adobe Sign, Qwilr, HoneyBook, AND.CO, Proposify, GleanQuote, SignNow and eSign Genie.

Data extracted manually or by OCR, with potential errors.

Time to complete:

Surety Broker: 30 - 45 Minutes to prepare
Principal: 20- 30 Minutes to prepare
Obligee: 20 - 30 Minutes to validate

Total - Over one hour

Burden to complete:

Requires the person executing the bond to be present and provide wet signature
Requires a notary to be present and provide wet signature.

Process for issuance

The surety bond form is completed by filling in blanks on the form before printing.
The person manually executing the bond provides evidence they are authorized by a manually prepared power of attorney form confirming the authority level.
E-signatures are added to the document
The original bond is emailed to others that need to add their e-signature

The receiver of the bond needs to confirm:

Bond form is completed accurately
Power of attorney is completed accurately
Limit of authority is consistent with the bond amount.
Notary for accuracy and consistent with person executing the bond
Surety is licensed in the jurisdiction
Surety has an acceptable BEST rating
Surety has an acceptable T-List for the bond amount.
As an extra step some bonds require additional wet signatures as witnesses.

Validation

Once the bond review is complete the receiver needs to validate the bond by manually contacting the surety or by submitting a manually prepared form to the surety

Digital Surety Bond

Issued online and distributed by email, or secure download, with standardized data elements that can be imported with bond text incorporated by reference to the specific bond form.

Can be viewed and printed as a PDF.

Data elements are importable error free.

Time to complete:

Surety Broker 10 Minutes to prepare
Principal: 5 Minutes to execute online
Obligee: 1 Minute to validate online

Total - Under 20 minutes

Process for issuance

Person executing the surety bond logs on their authorized electronic surety bond provider service Surety2000, BondPro, Surepath or eSurety.
Person executing the bond is verified by their secure login credentials, which includes which surety companies they have power of attorney with, and what their authority limits are for reach surety.
The surety bond form is completed by entering the standardized bond form data elements online.
The bond is verified for compliance with state licensing, BEST rating and T-List requirements before it can be executed.
The bond is executed online by the surety and/or surety broker.
The principal logs on and verified by their secure login credentials to execute the bond.
The electronic surety bond provider issues a Bond Validation Number (BVN) that can be used by obliges or other stakeholders to validate the bond online and receive the surety bond data elements for importing into their respective systems along with the PDF image.
Because everyone executing the bond was independently validated and verified no need for power of attorney, notaries, or digital signatures from third parties.

Validation

Done online with Bond Validation number

Because of electronic surety bond provider system and process checks the receiver of the digital bond does not need to confirm:

Bond form is completed accurately

The online processing has internal checks to make sure the bond is completed accurately.

Power of attorney is completed accurately

The online processing has internal checks to make sure the power of attorney is completed accurately.

Limit of authority is consistent with the bond amount.

The online processing has internal checks to make sure the bond amount is within the limit authorized by the surety for the person executing the bond on behalf of the surety.

Notary for accuracy and consistent with person executing the bond

Notary not needed for digital bond. The online system verifies who executed the bond as part of the secure login process.

Surety is licensed in the jurisdiction

The online system verifies the surety is licensed in the state.

Surety has an acceptable BEST rating

The online system verifies the BEST rating of the surety.

Surety has an acceptable T-List for the bond amount.

The online system verifies the T-list and that the bond amount is in compliance with T-List size limits.

As an extra step some bonds require additional wet signatures as witnesses.

Witness is not needed with a digital bond

Frequently Asked Questions

What is the legal difference between a manually prepared paper bond, and electronic bond and a digital bond?

Nothing, they all have the same legal standing.

How is the process for securing an digital surety bond different than a paper bond?

There is no difference, the surety broker develops the underwriting submission and the surety company authorizes the extension of surety credit based on its underwriting.
The efficiency for exchanging underwriting data does not change the process.

What is the efficiency difference between a manually prepared paper bond and a digital bond?

The processing and administrative time for the manually prepared paper bond is extensive and costly for all stakeholders.

The various paper forms require individual handling as the data elements can vary and data needs to individually inserted throughout the form, along with the expense of generating and executing the power of attorney, notary and shipping documents.
For those receiving the bond the expense of validating the bond, verifying it is correctly executed and then manually extracting and rekeying the data into their respective systems compounds the high cost of paper bonds.

The digital bond can be executed online and administered cost effectively.

How does the XBRL data standard digital bond improve efficiency over the paper bond?

The established “Data Set” of data elements utilize the XBRL taxonomy to assure “apples to apples” reliability of the data to enable data exchange throughout the ecosystem of stakeholders.
This data interoperability will enable system designers and programmers to develop data analytical tools with digital administrative processes unique to their respective needs.

How can just the one XBRL standard digital bond form cover all the different obligations, contracts and circumstances?

The XBRL Standard Digital Surety Bond backs a contract or obligation, it does not define the obligations of the surety under the contract, the contract defines the obligations and cure options for a default.
The XBRL Standard Digital Surety Bond includes all the data elements for incorporating the underlying contract and/or obligations by reference, so the bond itself does not have to repeat terms and conditions, which also eliminates any conflicts in coverage interpretation.
The XBRL Standard Digital Surety Bond utilizes standardized text for surety bond terms and conditions, including how claims are handled, referencing the data elements instead of requiring form filling. This allows stakeholders to focus on data elements for the information needed, confident in the terms and conditions of "boiler plate text" without the need for additional review.
The XBRL Standard Digital Surety Bond also includes data elements for monitoring and measuring contract compliance along with data elements for communication between stakeholders to make the surety product more reliable and predicable.

Digitally Connecting Stakeholders with Capital & Financial Markets

Digital Surety Bonds

Unleashing the Power of Data Standards

Learn More

Sample Digital Bonds

Distinction Between Paper Bond, Electronic Bond and Digital Bond

Frequently Asked Questions

Digitally Connecting Stakeholders with Capital & Financial Markets

Digital Surety Bonds

Unleashing the Power of Data Standards

Learn More

Sample Digital Bonds

Distinction Between Paper Bond, Electronic Bond and Digital Bond

Frequently Asked Questions

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