In Their Own Words: NASBP Past Presidents Offer Their Perspectives Past and Future

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NASBP’s presidents gain a unique perspective on both the challenges that the surety industry is facing and the opportunities that are available as they rise through the chairs of the executive committee and then serve a year as the top volunteer leader. Several past presidents shared their reflections on what has changed in the surety industry over the past 10-plus years and on how it may evolve during the next decade. Their terms served as NASBP President are indicated in parentheses by their names.

John M. Rindt (President 2011-2012)
Senior Vice President
HUB International

John Rindt saw a great deal of surety consolidation in the early 1980s, with companies that had a regional presence and their own unique underwriting style disappearing in mergers. He believes a similar consolidation will be coming in the next decade due to all of the new entrants into the marketplace over the last several years. “There are only so many dollars out there that everyone is chasing,” he said.

With the increase of companies in the industry, the movement of personnel has been unprecedented. “In my day, it wasn’t unusual for someone to be with the same surety company for all of his or her career. That’s very unusual today; you have people moving between companies every three to five years,” Rindt said. “This rather significant movement of people has driven up salaries in our industry, assuring we will continue to attract very bright professionals. “

One other big change for the industry has been a significant expansion of credit score bonds. While the relatively successful results have led to some industry concerns that bonds will one day become a commodity, Rindt doesn’t believe this will happen. “Fortunately, as professional surety agents, we bring too much to the table in an advisory role. We work with our client and the surety to develop a long-term, trusting relationship where we all succeed.”

Carl E. Dohn, Jr. (President 2012-2013)
Agency President
AssuredPartners

The consolidation of agencies over the past 10 years has changed how surety agents communicate; there’s more texting and emails and less personal contact. But understanding a contractor’s character requires a more personal approach. “I believe in eye-to-eye contact, in seeing how people respond to questions so you can get a feel for how straightforward and honest they are,” said Carl Dohn, Jr.

Another trend that limits personal interactions with contractors is the growth of fast-track bonds. When contractors obtain a surety bond based on their personal credit, they may become resistant to improving their management systems and preparing their business for future growth.

Dohn is also concerned about the synergies that are missed with remote work. “I think younger people are going to have a harder time learning all of the subtleties of surety credit that are gained when you’re in an environment with coworkers who are working on a deal, analyzing it, and figuring out different angles,” he said.

Although recent trends have led to more consolidations in the industry, Dohn believes that trend may reverse, with more agents going out on their own. “If you’re a good surety producer, the surety companies will give you a contract; you don’t have to have a big book of business.  More people will be doing that as they become frustrated with how hard they have to work without getting paid a fair amount,” he added.

Lawrence F. McMahon (President 2013-2014)
Executive Vice President/Surety Manager
Alliant Insurance Services

The talent gap is the biggest change that Larry McMahon has seen in the surety industry over the last decade. People with 30 to 40 years of life lessons and underwriting experience are retiring and being replaced by people who have just five to 10 years of that type of experience.

“That’s not going to result in losses for the industry, but it’s going to result in decisions being made that could impact the industry in the future,” he said. “So it’s incumbent on the sureties, the agencies, and the brokerage firms out there to train people.” That should include on-the-job training and courses through NASBP. He especially encourages less experienced professionals to find multiple mentors across the whole industry who are willing to share their knowledge.

He is concerned about the impact of one Covid-related industry change—remote working. “While we understand that you can get more work done when we’re left to our own devices, we’re missing the camaraderie, the mentoring side of the work. And I think that’s going to impact us long term.”

Technology will also be changing the industry in the coming years. “We still require ‘wet’ signatures and in-person notaries. DocuSign and other forms of virtual signing are the wave of the future, because with them we are saving time and we’re saving money,” he added.

Susan Hecker (President 2015-2016)
Executive Vice President
Director – National Contract Surety
Arthur J. Gallagher Risk Management Services

During the construction of San Francisco’s new Bay Bridge 20 years ago, Caltrans could only obtain a surety bond to cover a fraction of construction costs. But over the last decade, “industry support for larger projects with longer durations has changed pretty significantly,” said Susan Hecker. “There are more good sureties now who can participate in larger accounts.” 

Another positive trend in the last 10 years is that surety companies are doing more training of their own people rather than simply hiring them away from other firms, she added.

Hecker believes the remote work opportunities that started with Covid are “extraordinarily good” for the industry and have helped bring more women into surety. “It doesn’t matter where people are based; it’s more important to have someone who can communicate well, who is engaged, and who cares about the clients.” While there is some loss of the learning when people aren’t physically working together, “I think the positives are at least as beneficial when people are happy with their work situation,” she said.

Hecker believes that the surety industry will use AI more over the next decade. “But even if you introduce AI into this, the fundamentals of underwriting are still going to be there. There will be a need for people who understand the industry and can help contractors and customers find the right market to support their business plan.” 

Lynne Cook (President 2016-2017)
NASBP Retired Surety Professional

“One of the biggest changes over the last 20 years has been the segmentation of the business,” said Lynne Cook, who was previously EVP & Principal at Early, Cassidy & Schilling, an Assured Partners Agency, before retiring. “We have become more specialized in that you have either small or large contract or small or large commercial, and there are different underwriters for each of those. That’s allowed people to become specialists.”

The commercial surety business has matured over that same period. “Years ago, it was a quick-turn, small bond business, but it has come into its own, producing larger premium items,” she said. This has opened new markets, both sureties and products. A few examples of newer bonds are for wind, solar, electric charging stations, and surety-backed letters of credit for banks.”

In the next few years, if the federal programs mask a poor performing contractor, she expects an uptick in the loss ratio and to see the industry relying more heavily on public sector projects. She also anticipates a growth in international business. “It takes a surety a while to figure out how to do business in other places, and some have, so I think international business will become more common.”

Howard Cowan (President 2017-2018)
Principal
Acrisure, LLC

The surety workforce, once dominated by white males, has become much more diverse during Howard Cowan’s 50-year career. The inclusion of more women and people from different ethnic backgrounds “has been a tremendous positive change in the workforce,” he said.

The adoption of technology has been generally positive as well, but there is a downside. “For example, it may take just minutes instead of an entire afternoon to look at current backlog. But [the longer time] forced you to think about what the numbers meant,” Cowan added. As the industry relies more on technologies in the coming decade, perhaps even AI, underwriters and agents must ensure they look carefully at the numbers technologies provide to determine if anything needs deeper investigation.

For the immediate future, Cowan believes the economic environment will result in less private construction. “On the underwriting side, there’s going to be very close attention to the adequacy of owner financing,” he said. Easy credit and low interest rates have disappeared, resulting in more private projects being abandoned. “We have had contractors who are not being paid, and that’s going to ripple right through their balance sheets and income statements. That’s a significant challenge on both sides of the surety bond equation, for underwriters and the end users,” he added.

The three Cs of underwriting will continue to be key in writing surety, with the character of the contractor the most important factor. “The biggest and largest number of losses have been where character is the key issue,” Cowan said.

Mark M. Munekawa (President 2020-2021)
Sr. Vice President – Surety, Partner
Woodruff-Sawyer & Co.

In recent years, the surety industry has been able to recruit more good talent from colleges and from other industries. “I think we’ve found a better way to communicate a positive message about a surety career through efforts like NASBP’s Be Guaranteed to Succeed campaign,” Munekawa said.

At the same time, brokerage consolidation due to private-equity funded mergers and acquisitions has permanently changed the brokerage landscape and impacted NASBP membership as well.

Munekawa said in the coming years the surety industry must continue to adapt to new and different project delivery systems where owners shift risks to general contractors. Subcontractor default insurance (SDI) now appears to be a permanent fixture that sureties and brokers factor into their underwriting and advice to contractors. The surety industry must also understand how to underwrite different types of capitalization models that have resulted from private equity buying the industry’s commercial and construction clients.

Challenges continuing into the next decade include disintermediation, direct marketing and sales by some surety companies, and the commoditization of small bonds. These trends make it necessary for surety brokers to demonstrate how we add value to the process, through industry knowledge and expertise and acting as a responsible trusted advisor.

“Both NASBP and the SFAA have done a good job in trying to tackle what’s ahead, but I don’t think we’ve done enough,” said Munekawa. “We have all got to adapt, otherwise, we could find ourselves becoming somewhat irrelevant as new methods of doing business evolve.”