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Originally Posted by Bond Magician What does the ILOC's purpose? |
The purpose of the ILOC is to ensure that, in the event of a claim, the bond company can satisfy the claim as quickly as necessary. Bond companies are sometimes given an unreasonably short window in which to respond to a claim. A letter of credit doesn't necessarily make a poor credit risk acceptable but instead will allow the surety company to react to a claim without jeopardizing its standing as an admitted bond writer in a particular state or jurisdiction. Sometimes an ILOC in an amount greater than the bond amount is required to cover potential expenses.