House Small Business Committee Issues Testimony From Travelers Bond & Specialty Insurance Regional Underwriting Officer Pulver
The SBA is the
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My name is
I am here today on behalf of the
Today, I will be addressing three main topics:
* Background on surety bonding and operation of the SBA bond guarantee program
* How the SBA program helps small and emerging contractors grow their companies and contribute to the economic strength of their communities
* Positive improvements to the program
1) Background on Surety Bonding and Operation of the SBA Bond Guarantee Program
As you may already know, contract surety bonds are generally required by federal statute since 1935 and laws in every state to guarantee the completion of federal, state, and municipal construction projects. My role is to prequalify the project contactors, which includes reviewing their ability to perform the project and ensuring the suppliers, subcontractors, and laborers are paid.
The
The SBA Surety Bond Guarantee Program currently consists of the Plan A (or Prior Approval) program and Plan B (or the Preferred Surety Bond) program. Travelers participates in the Plan B program. This means the SBA has reviewed our underwriting and administrative practices and financial strength and made a determination as to the aggregate limit of bonds that Travelers can write. Under the Plan B program, Travelers does not have to submit individual bonds to the SBA for approval, which streamlines the process. The SBA has given us the authority to underwrite and issue the bonds on the SBA's behalf. As a "Preferred Surety," Travelers must also agree to periodic review and audit of SBA bonds.
As of the most recent update from the SBA, Travelers is the third largest writer of bonds in the Plan B program, averaging 262 bonds annually for an average of 86 small businesses since 2019. It should be noted that this ranking is determined by the number of bonds written rather than by the amount of surety premium.
Under the Plan A and Plan B programs, the emerging contractor must qualify as a small business as classified under the
The SBA's regulations provide that a bond must be required in the contract to be eligible for a guarantee. Also, the contractor must certify that they have tried and failed to obtain bonding in the standard market.
The SBA Bond Guarantee Program provides an effective tool for surety companies to favorably underwrite small and emerging contractors that otherwise would not qualify for surety support. Although these emerging contractors may not have balance sheets that reflect the financial strength of larger contractors, the surety will still undertake a rigorous pre-qualification process focused on the contractor's ability to complete the obligation.
2) How the SBA program helps Small and Emerging Contractors Grow their Companies and Contribute to the Economic Strength of their Communities
Providing an initial opportunity for small and emerging contractors to participate in the public bid market is critical to their future success. While there is no time restriction for a contactor regarding how long the SBA supports them, most growth-oriented contractors aim to meet the underwriting requirements of a traditional surety market and graduate from the SBA program.
During what I refer to as the "groom and grow" period, the small and emerging contractor receives coaching and advice from their surety bond professionals on how to position their company better to obtain surety bond credit support in the traditional surety marketplace. Undoubtedly, the
3) Positive reforms to the program
Under the leadership of
I commend the SBA for making these improvements to the program and would like to thank the Committee for your support and leadership on this issue.
Thank you for the opportunity to appear before you today.
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Original text here: https://smallbusiness.house.gov/uploadedfiles/07-27-22_mr._pulver_testimony.pdf
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