Surety Bonds--Holding Company

[Unregistered]

If a holding company owns both a surety company and a construction company that performs public contracts, can the surety company provide bid/ performance bonds to the construction company, or is there some sort of "arms reach" restriction on who a surety company can provide bonds to?

[Admin]

Interesting question...

There is no law (that I know of) that prohibits them from bonding their own interests. However, most bonding companies have re-insurers that over see their underwriting practices, especially for larger guarantees. If a surety bonds principals that do not qualify they could jeopardize their reinsurance policy, which would keep them from doing so.