To Become an Authorized (Certified) Surety and/or Reinsurer on Federal Bonds
Thank you for your interest in the requirements of the Treasury which must be observed before a company may qualify as an acceptable surety on Federal bonds.
Please refer to the following: (1) Act of Congress, approved July 30, 1947, as amended (31 U.S.C. 9304-9308), under which surety companies may be authorized to execute bonds in favor of the United States or to reinsure such bonds; (2) 31 C.F.R. 223 (Treasury Circular 297, Revised), which outlines the regulations applicable to surety companies doing business with the United States [Please note Section 223.5(a): The company must already engage in the business of suretyship (as evidenced by premiums written and reported on the Annual Financial Statement). In addition, it must be the intention of the company to actively engage in the execution of surety bonds in favor of the United States.];(3) Department Circular 570 listing companies holding Certificates of Authority as acceptable sureties on Federal bonds, and (4) the Treasury Department's Annual Letter to Executive Officers of Surety Companies Reporting to the Treasury. This letter is mailed annually to companies certified by the Treasury, and includes instructions relating to the submission of annual and quarterly financial statements. Your attention is directed to our minimum financial requirements at Instruction XXof the Annual Letter and at
It is necessary that the documents indicated below be submitted to support an application for a Certificate of Authority. Please comply fully with the requirements set forth on the list relative to the submission of necessary data. Incomplete applications will be rejected. Required certification of documents, other than financial statements, should be currently dated, that is, within six months of the date of application.
Applications are reviewed in the order in which they are received. During the period from March through June each year, we defer action on new applications in order to complete the certification renewal of approximately 250 companies on the Treasury's list of approved sureties. During this time, applications may be filed, but they will not be processed.
Please let us know if we can be of further assistance. We can be reached at (202) 874-6850.
To apply for Certified status, a company must:
(A) Meet the requirements set forth in :
(B) Submit application fee of $9,300.(This fee is subject to change every December 31.). You must pay on-line via ACH Debit or Credit Card.
(C) Listed below are the documents required to be submitted when the company is applying with this Department. There are several forms that must become a part of the application and can be downloaded.
(D) Submit the following documents to:
Department of the Treasury - FMS
1. A written request for a Certificate of Authority, signed by an officer of the Company. This request is acceptable on Company letterhead.
This letter should also indicate: (a) whether or not the Company had ever applied with this Department before; (b) whether or not the Company had ever been Treasury approved before; and (c) the dates applicable; and (d) the reason for termination of its Treasury approval.
2. A certified* copy of the Company's Charter or Articles of Incorporation with all amendments as of the application date from which it may be readily ascertainable that the Company may write Surety, as well as the legal name of the Company.
3. A certified* copy of the Company's license in its State of Incorporation. It should be evident that the Company's license authorizes it to write Surety.
4. A certificate* from an officer of the Company which includes the following wording:
(a) The Company is authorized to transact surety business; and
(b) If granted a Treasury Certificate of Authority, there are no restrictions upon the Company which would prevent it from being able to:
(1) execute and guarantee bonds and undertakings in judicial proceedings, and
(2) guarantee contracts to which the United States is a party.
5a. A certificate listing the names of the Company's current officers and directors (as of the application date).
b. Biographical sketches (preferably on the NAIC approved form, signed and notarized within six months of date of application) of each officer and director. If this data does not sufficiently indicate the Company's employees with expertise in various critical areas - surety, underwriting, claims, reinsurance, accounting, etc., a separate detailed description should be attached to the NAIC form. The biographies should include:
(1) The names of all surety and other companies affiliated with in the past and the periods covered, including the kind of business if the company's name does not make it evident.
(2) A list of any companies affiliated with in the past that have been placed in liquidation or receivership; and,
(3) A list of any criminal convictions or a statement indicating "no criminal convictions".
c. Biographical sketches (preferably in the NAIC approved form, signed and notarized within six months of date of application) of surety managers and any managing general agents with the authority to write surety business (biographies of corporate officers should be sent if MGA is a corporate entity).
6a. A list of the names and post office addresses of holders of more than 5% of the Company's stock and the number of shares held by each. The financial statements of corporate owners should be provided. If privately held, the ultimate individual owners must be identified. Biographical affidavits of owners should be submitted if not done under item 5.
b. If the Company has been recently acquired, detailed information relative to the financing of the acquisition should be provided.
c. Any intention of future acquisition activity or mergers in which the Company is involved in any capacity should be disclosed.
7. A certificate* of the Insurance Commissioner or other proper financial official of the State in which the Company is incorporated or of any state of the United States, showing that the Company has on deposit, for the protection of claimants, including all its policyholders in the United States, legal investments having a current market value of not less than $100,000. A certificate showing only par value must be accompanied by information showing market value.
8a. Copies of Annual Financial Statements as of December 31 for the last two years preceding the date of the application on the form prescribed by the National Association of Insurance Commissioners, with all Schedules and Exhibits completed. The Treasury's Schedule F form should be completed and submitted as a part of the filing for the most recent year-end. Each year's statement is to be manually signed (facsimile signatures are not acceptable) by:
(1) The President;
b. Annual Statement diskettes must be in accordance with the NAIC Annual Statement Diskette Filing Specifications. Please note that this Department should be notified if the Company's disk is rejected by the NAIC or faulty in any way.
c. An Annual Statement (and diskette) should be furnished for each insurance subsidiary and for each non-insurance subsidiary, an independently audited financial statement or one certified by an officer of the controlling company, as of December 31 of the latest preceding year, to support the stock value of such subsidiaries.
d. An Annual Statement (and diskette) of the Company's parent, if applicable, should also be provided.
9. A Quarterly Financial Statement (and diskette) as of the close of the most recent quarter, when one or more quarters has elapsed since the end of the year. Should an additional quarterly period expire while the application is under consideration, current Quarterly Statements shall be furnished as soon as available. Also, contingent liabilities should be disclosed on the Quarterly Statement.
10a. Report of the most recent examination (within the last three years) of the Company's financial condition and affairs, which was made by the domiciliary Insurance Department.
b. Most recent C.P.A. Report, Report on Internal Control, and Management Letter, including information relative to any exceptions taken by the auditors and related Management comments.
c. The Company's 10K Report if the Company files with the SEC.
d. A copy of the Management's Discussion and Analysis as of the most recent year ended.
11. The latest IRIS ratio results (calculated by the NAIC), and an explanation for any ratios outside the normal range.
12. A list of states and other areas in which the Company is licensed to transact surety business. "Other areas" include District of Columbia, Guam, Puerto Rico, and the Virgin Islands. A form for reporting this information can be downloaded.
13. A memorandum setting forth:
(a) A comprehensive statement of the Company's method of operation, including underwriting guidelines, claims adjustment procedures, reinsurance philosophy, control over collateral, etc.;
(b) The particular classes of business in which it engages;
(c) Any special underwriting agreements, management agreements or pooling agreements in force, and copies thereof; and
(d) Present plans of the company as to:
(1) The types of Federal bonds it intends to write such as bail,construction, custom, etc.;
14. A list of all bonds and policies (in all lines of business) in force as of the application date with a penal amount or face amount in excess of 10% of the Company's capital and surplus. Include all such excess risks even though the net retention on the risks is within the 10% limitation. Information is to be furnished as to how the excess amount of each risk has been protected.
In all casualty lines of business where the excess risks may be quite numerous and where reinsurance of such risks is covered automatically under reinsurance agreements, it is sufficient to list the largest risk underwritten in detail. A condensed summary showing the names of the reinsuring companies and the limits accepted by them on the various classes of business, will suffice.
The Treasury Form FMS 285-A should be used for reporting the required information. "None" should be inserted on the Form if no such risks are in force. A 285-A form is to be filed every quarter and can be downloaded.
15a. Copies of all reinsurance treaties currently in force and a condensed summary showing the following. There is a specific Treasury form to be used for this purpose. It is entitled Summary of Reinsurance Treaties.
(1) The Company's net retention on each layer of the Reinsurance Agreement;
NOTE: A Company must have reinsurance, the majority of which is Treasury recognized, or its application will not be considered.
b. Where letters of credit or trust accounts are of a material amount, copies of related documents should be submitted.
c. A notarized statement signed by an officer of the Company certifying:
(1) The condensed summaries of the Reinsurance Agreements are true and correct, and
(2) Each of the Company's principal Reinsurance Agreements have been submitted.
16. Any Company of a foreign country holding a license from any State of the United States, making application to act only as a reinsuring company on bonds in favor of the United States, should furnish a copy of its Trusteed Surplus Statement as of December 31 for the year preceding the date of the application, certified by the Insurance Commissioner of the State with which the Company has made such deposits.
17. The U.S. Attorney General has ruled that a mutual company does not satisfy the requirements of 31 U.S.C. 9305 in that a company must have Paid-up Capital of not less than $250,000 to act as a surety on Federal bonds. At 39 Op. Atty. Gen. 310 (1939), a mutual company must be required by its State of Incorporation to have and maintain at all times an unimpaired surplus of at least $250,000. Therefore, a mutual applicant must submit a certificate from the Insurance Commissioner of its State of Incorporation stating the amount of unimpaired surplus that it must have and maintain at all times, and the governing provision of the law of that State.
18. A payment in the amount of $9,300 covering the fee prescribed in 31 CFR 223.22(a). (This fee should be submitted at approximately the same time as the rest of the application documents.)
You must Pay On-Line at www.fms.treas.gov/c570.
This fee is subject to change every December 31.
Please contact the Surety Bond Branch at (202) 874-6850 if you have any questions regarding your application.
*NOTE: Required certification of documents should be currently dated (certified within six months of date of application). Certifications must be obtained from the Company's State of Incorporation's Department of Insurance, unless otherwise specified.
Paperwork Reduction Act and Privacy Act Statement
By authority of 31 U.S.C. 9304-9308, 31 CFR, Part 223, the information requested in this letter is required to retain a benefit and to enable the Assistant Commissioner, Financial Information, Financial Management Service, Department of the Treasury, to determine if your company meets all qualifications to be granted a Certificate of Authority to write or reinsure Federal surety bonds. Failure to provide the information will result in denial of certification
Burden Estimate Statement
The estimated average burden associated with this collection is 18 hours per respondent or record keeper, depending on individual circumstances. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the Financial Management Service, Facilities Management Division, Property & Supply Section, Ardmore East Business Center, 3361-L 75th Avenue, Landover. MD 20785 and the Office of Management and Budget, Paperwork Reduction Project (1510-0057) Washington, DC 20503.
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