Any promise to answer for another person's debts or defaults, including the promise that a surety makes to the obligee under a bond, derives from which
... [Show More] one of these? - correct answer Statutes of frauds
Following the Civil War, the growing number and complexity of financial/commercial relationships led to the need for - correct answer Commercial suretyship.
In accordance with a contract to build a county shed for the Village of Malcom, Raymone Construction purchases a contract surety bond from SureRite Insurance. Identify the principal, obligee, and surety in this suretyship. - correct answer Principal--Raymone Construction; obligee--Village of Malcom; Surety--SureRite Insurance
The two basic types of bonds that are written today are - correct answer Contract surety bonds and commercial surety bonds
Sureties use what written document to authorize a producer to act as the surety's agent in bond production? - correct answer A power of attorney
When evaluating a surety claim, claims representatives are often assisted by outside legal counsel. What other professionals assist claims representatives? - correct answer Engineers
Suretyship and banking are alike in that - correct answer Neither expects to suffer a loss
Suretyship and insurance are alike in that - correct answer Insurance commissioners regulate both.
In the surety bond three-party relationship, the party who is primarily responsible for fulfilling the obligation and who typically has control of the obligation is the - correct answer Principal
Because most bonds are "joint and several liability" documents, the obligee can recover losses from - correct answer The principal or the surety, or from both.
A financial guarantee differs from performance and fidelity guarantees because it requires honesty, the ability to perform the contract, and - correct answer The ability to pay money to meet the contractual obligation.
Instead of holding a principal's assets as security, a surety might choose to hold an instrument issued by a commercial bank for the principal, but with the surety named as the beneficiary. What is this instrument? - correct answer An irrevocable standby letter of credit
A type of reinsurance transaction that involves an agreement between the primary insurer and the reinsurer specifying how to transfer risks, that defines the eligible risks in terms of lines and classes of business, that specifies the parties' obligations, and for which eligible risks are automatically reinsured, is - correct answer Treaty reinsurance
Which of these statements regarding the principal allocation methods for reinsurance of surety bonds is accurate? - correct answer Both facultative and treaty reinsurance of bonds can be written as pro rata or excess of loss.
A basic type of bond that involves all situations in which sureties guarantee performance of obligations that generally do not arise from contracts is - correct answer Commercial surety bonds.
Which one of the following developed in the United States to guarantee the large amounts of money involved in the country's industrial and commercial growth? - correct answer Corporate suretyship
The establishment of the formal contract between the surety, principal, and obligee that is offered to the principal is called - correct answer Execution of a bond
While suretyship and banking both use a prequalification process to extend credit to their customers, suretyship is different from bank credit in that - correct answer Suretyship guarantees performance as well as monetary obligations.
Except in the case of a forfeiture bond, if the principal defaults, the surety will pay - correct answer Up to the bond penalty, but no more than the obligee's actual loss amount.
In an unlimited cosurety arrangement, the obligee can collect - correct answer The full loss from any of the cosureties up to the penal sum of the bond.
The Miller Act was passed to require principals, in addition to furnishing a performance bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by the contractor - correct answer A. For labor and materials at the project completion for all federal jobs.
A contract bond that guarantees the local governmental authority that a principal will complete a development in accordance with approved proposals and at the principal's expense is a - correct answer B. Subdivision bond.
Performance bonds guarantee that the obligee will be indemnified for any loss resulting from the principal's failure to perform the work - correct answer A. According to the contract, plans, and specifications; at the agreed price; and within the time allowed.
In bonds under this classification, the surety pays the entire bond penalty if the principal fails to complete the obligations. - correct answer B. Forfeiture bonds. Under the forfeiture bonds classification, the surety pays the entire bond penalty if the principal fails to complete the obligations.
This classification of license and permit bonds poses the least risk to the surety and guarantees that the principal will conform with laws that govern the business or activity it conducts.
Which bond classification is described? - correct answer Compliance only bonds
Which one of these accurately reflects a characteristic of license and permit bonds? - correct answer A license and permit bond frequently must be furnished to the appropriate public entity by those who need licenses or permits.
In this public official category of bonds, sureties pay losses when subordinates in the principal's office cause them, as well as when the principal causes them. This described category of bonds - correct answer Is officials who handle public funds, and the principals are charged with honesty and faithful performance of duty while handling money as required by law.
Bonds in the category of public official bonds for officials whose duties require direct involvement with members of the public - correct answer C. Pay losses when principals commit wrongful acts such as seizing the wrong goods or making wrongful arrests.
Public official bonds are written for principals who have administrative duties but do not handle money and who - correct answer Include commissioners, assessors, judges, coroners, town clerks, engineers, and auditors.
A bond that guarantees that, if a higher court sustains an initial judgment on appeal, the defendant will pay the entire judgment, plus court costs and interest, is - correct answer A. A supersedeas bond.
Judicial bonds - correct answer A. Are a category of court bonds that arise out of litigation and are posted by persons seeking or appealing a remedy in court.
One type of fiduciary bond is required of an individual who has the legal responsibility for the care of a minor or a legally incompetent person or for such a person's property. This bond is called - correct answer D. A guardians bond.
A person who commences an action against another to obtain an equitable remedy may be required to post a bond before the court will proceed with the action. This bond is called - correct answer B. A plaintiff bond.
The legally mandated hazardous waste facilities performance bond - correct answer D. Can be posted only for hazardous waste facilities with permits, and it requires an underwriting review of the closure plan.
Which one of these statements is true regarding financial guaranty bonds? - correct answer B. When in place, the entire issue of these bonds would have a higher investment grade, allowing municipalities to sell their bonds at a lower interest rate.
Which one of these statements is true about lost securities bonds? - correct answer C. The security owner signs an affidavit describing the lost security and explaining how it became lost and completes a bond application with an indemnity agreement.
Which one of these types of miscellaneous bonds guarantees that the principal will establish and fund a trust or will provide alternative financial insurance? - correct answer B. Hazardous waste facilities financial guarantee bonds
A bond that guarantees that faulty work will be corrected and defective materials will be replaced for a period of one year or less and that is usually provided with a performance bond at no additional cost is a - correct answer B. Maintenance bond.
Which one of these statements provides an accurate description of license and permit bonds or their use? - correct answer C. Licenses help regulate license holders through statutes, regulations, or ordinances, and they are backed by license and permit bonds.
Under a public official bond guaranteeing the honesty of a treasurer, - correct answer C. He or she must account for the cash that he or she holds while in office.
Which type of contract bond guarantees that the principal will enter into a contract and will provide the required bonds if the bid is accepted? - correct answer C. Bid bond
Under a bid bond, if the bid is accepted and the principal refuses to enter into the contract or fails to provide the additional required bonds, subject to the penal amount of thebond, the obligee is generally entitled to be paid - correct answer The difference between the amount of the principal's bid and the next lowest bid the obligee finally accepts.
The Miller Act was passed to require principals, in addition to furnishing a performance bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by the contractor - correct answer For labor and materials at the project completion for all federal jobs.
Bonds under this classification guarantee that the principal will properly account for and remit government funds collected as required.
Which license and permit bond classification is described? - correct answer D. Tax or fee bonds
This classification of license and permit bonds guarantees that the principal will conduct specific business activities according to the law and protect the public from misrepresentation or fraudulent practices by the seller. Which of the following classification of license and permit bonds is described? - correct answer Merchandising and dealer bonds
This classification of license and permit bonds poses the least risk to the surety and guarantees that the principal will conform with laws that govern the business or activity it conducts.
Which bond classification is described? - correct answer Compliance-only bonds.
Public official bonds for officials who handle public funds - correct answer A government entity and in which the official or employee should deposit public funds.
The court requires a fiduciary who is named in a will to administer an estate to file a type of fiduciary bond. This fiduciary is called - correct answer B. An executor.
Bond losses occur when a fiduciary and its surety are held accountable because the fiduciary did not exercise reasonable care in notifying all heirs of an impending probate proceeding. This fiduciary is called - correct answer An administrator.
A person who commences an action against another to obtain an equitable remedy may be required to post a bond before the court will proceed with the action. This bond is called - correct answer A plaintiff bond.
Judicial bonds - correct answer Are a category of court bonds that arise out of litigation and are posted by persons seeking or appealing a remedy in court.
The principal on a hazardous waste bond - correct answer Is an owner or operator of a hazardous waste facility and is responsible for closure and postclosure care of the facility.
What type of miscellaneous bond do sureties often write as open penalty forms to provide for fluctuation of the value of the subject of the bond? - correct answer A lost security bond
The legally mandated hazardous waste facilities performance bond - correct answer Can be posted only for hazardous waste facilities with permits, and it requires an underwriting review of the closure plan.
Which one of these statements is true regarding financial guaranty bonds? - correct answer When in place, the entire issue of these bonds would have a higher investment grade, allowing municipalities to sell their bonds at a lower interest rate
A contract bond that guarantees the local governmental authority that a principal will complete a development in accordance with approved proposals and at the principal's expense is a - correct answer Subdivision
Which one of these accurately reflects a characteristic of license and permit bonds? - correct answer C. A license and permit bond frequently must be furnished to the appropriate public entity by those who need licenses or permits.
In this public official category of bonds, sureties pay losses when subordinates in the principal's office cause them, as well as when the principal causes them. This described category of bonds - correct answer D. Is officials who handle public funds, and the principals are charged with honesty and faithful performance of duty while handling money as required by law.
When selecting a surety company for a bonding relationship with a contractor, - correct answer The producer should consider the surety's suitability factors to the contractor's needs, including the surety's philosophies, financial capacity, stability, and comfort with the projects.
Which one of these statements is true regarding the surety producer's role in a bonding relationship? - correct answer The producer assists the contractor and the underwriter in the bond application and analyses; when the bond or credit line is approved by the underwriter, the producer assists with communication and continues as an integral part of the contractor's management team.
Which one of the following statements is true regarding a surety producer's role in its performance of credit analyses? - correct answer The producer's credit analysis should include a recommendation of a "responsible" line of surety credit and an appropriate work program to encourage the contractor's responsible growth.
Which one of the following contractor's assets would encourage a surety to underwrite contract bonds for the contractor or to extend a line of credit for bonding? - correct answer Quality stocks and bonds and accounts receivable
A pre-set surety bond credit limit - correct answer Eliminates the need to reevaluate the contractor's need for every bond.
Which one of these statements regarding a surety's capacity is true? - correct answer If a contractor appears to be outgrowing the surety's capacity, the producer should arrange a backup surety with adequate capacity to replace the first surety before reaching capacity.
A pre-set credit line has which one of these benefits? - correct answer The limit enables the surety producer to service the contractor's normal bond needs more effectively and within the terms and conditions of the credit line.
A $5 million/$20 million contract surety credit line means that the surety is willing to - correct answer Bond single jobs up to a contract price of $5 million when the aggregate contract backlog does not exceed $20 million.
Which one of the following is a factor of marketing that requires the surety producer to have education, training, knowledge, skill, and organization to provide professional service that clients need? - correct answer Product
Which one of the following statements is true regarding surety producers' marketing? - correct answer By dividing a target market into more specific trade groups, an agency can tailor services, expertise, and promotional material to that group's needs.
Which one of the following statements is true regarding surety producers' promotion? - correct answer Participating in professional seminars and construction industry associations is an excellent way to communicate to a target audience.
The most effective and credible form of promotion for surety producers is - correct answer Word-of-mouth advertising and referrals from the producer's satisfied clients.
When developing one aspect of the business plan, the planning group should consider their agency's philosophy and culture, management quality and commitment, team motivation and dedication, resources, and the continuity of ownership and management. Which one of the following describes this aspect of the planning process? - correct answer Identify the agency's strengths and weaknesses
A sound business philosophy considers and balances the mutual needs of - correct answer Clients, employees, management, equity owners, and the community at large.
When developing an effective business plan, which one of the following describes those people who should be included in the process? - correct answer Key managers from each functional area of the firm who will be responsible for implementing the plan
Each one of the following steps is performed toward the beginning of the development of a contract surety business plan EXCEPT: - correct answer Change goals and action steps as the agency's strengths and market conditions change
Which one of these categories of court bonds is written primarily on the basis of an attorney's character and reputation for trustworthiness? - correct answer Fiduciary bonds
Fiduciary bonds are a category of court bonds that are written primarily on the basis of an attorney's character and reputation for trustworthiness.
Sureties compete for commercial surety bonds in this category on the basis of service to the agent and to the client and they usually offer substantial price discounts for accounts with larger clients. Which one of these categories of bonds is described? - correct answer L&P, Misc bonds
Which one of these categories of court bonds is underwritten on the basis of the principal's financial capacity? - correct answer Judicial bonds
A standard letter of authority from a surety usually allows the producer to approve which one of the following types of bonds without the surety's approval? - correct answer A standard letter of authority from a surety usually allows the producer to approve bankruptcy bonds without the surety's approval.
What quality of the contractor-producer-underwriter relationship requires periodic visits to the contractor's office, visits to project sites with the contractor, and meetings with the contractor's key people concerns? - correct answer Ongoing dialogue
The quality of ongoing dialogue requires periodic visits to the contractor's office, visits to project sites with the contractor, and meetings with the contractor's key people.
What is the producer's ultimate objective in the contractor-producer-underwriter relationship? - correct answer To be as responsive as possible to the contractor's needs while presenting business that is reasonably consistent with the surety's underwriting standards
Correct. The producer's ultimate objective in the contractor-producer-underwriter relationship is to be as responsive as possible to the contractor's needs while presenting business that is reasonably consistent with the surety's underwriting standards.
With new accounts that another surety previously bonded, underwriters will be concerned that the contractor might have problems not readily apparent that might cause a potentially large loss. What facts might indicate that such a loss is a particularly relevant concern? - correct answer The contractor's prior surety refused to write a bond the contractor wanted.
Which quality of the contractor-producer-underwriter relationship requires underwriters and producers to follow their own underwriting convictions? - correct answer D. Common interests
Frequently having to react to emergency or artificial deadlines indicates a lack of what quality in the contractor-producer-underwriter relationship? - correct answer Communication
In evaluating capacity for continuity planning, the underwriter considers what two factors? - correct answer Continuity of management and continuity of ownership
Which one of the following in a bond applicant's personal and employment history provides the surety underwriter with evidence of good character? - correct answer Trade payment record
When assessing a contractor's capacity in terms of management control, what is the first step in the construction process? - correct answer Estimating
Which of these is one of the three factors that are focused on the contractor and are considered when underwriting contract bonds for construction? - correct answer Capacity
Extending a line of credit to bond a contractor's future projects is particularly useful for what sized contractors that have what frequency of bond requests? - correct answer A larger contractor with frequent bond requests
The underwriter must address the contract provisions for completing the work on time. If the contractor does not complete the work on time, one of the standard solutions is what? - correct answer LD's
The bond underwriter must underwrite the contract, which includes determining whether it allows for a shutdown because of what type of unfavorable conditions? - correct answer weather
The surety might forfeit a bid bond if which situation exists? - correct answer The difference between bid prices is more than the amount of the bid bond.
When monitoring the underwriting information of a contractor, an explanation is generally needed if the underwriter notices the contractor's bid reflects a difference in excess of what percent? - correct answer 10%
Which one of the following statements is true regarding sureties and credit acts and laws? - correct answer Sureties must be aware of continuous modifications by amendment, Federal Reserve Board staff commentaries, and the Federal Trade Commission
Which one of the following identifies the government entity that has added specific requirements to meet the guidelines set out under Regulation B and provides explanations and clarifications? - correct answer The Federal Reserve Board
Which one of the following includes sections of the Consumer Credit Protection Act that apply directly to the surety industry? - correct answer Titles VI and VII
Which one of the following identifies a section of the Consumer Credit Protection Act that applies to all credit transactions, commercial and personal, without regard to the nature or type of credit or the creditor? - correct answer Title VII, the Equal Credit Opportunity Act, which prevents creditors from discriminating against applicants on the basis of sex, marital status, race, color, religion, national origin, age, or receipt of public assistance income.
In one type of credit arrangement, a borrower purchases goods for resale to third parties, and a bank finances the purchase price. The bank secures the loan with a lien on the goods and, when each item is sold, the borrower pays the lender the full amount due on that item. This arrangement is called - correct answer A floor plan loan.
Which one of the following names a chapter of bankruptcy that contains provisions for corporate reorganizations—a means of preserving the going-concern value of a business enterprise to the benefit of all creditors through the elimination of the factors that created the distress? - correct answer Chapter 11
Respectively, the credit terms ROI, slow 60, CIA, and COD mean - correct answer Remit on receipt of invoice, payment was received 60 days after the due date, cash payment is required in advance, and cash is required on delivery.
When a creditor includes "2/10 N 30" on a credit report, this means that - correct answer The creditor offers a 2 percent (2/10) discount if the balance due is paid within ten days; otherwise, payment is due in full within thirty days (N 30).
Which one of the following sources of surety underwriting information provides the most reliable information because the party has less bias with regard to the principal's bond success? - correct answer Architects and engineers
The information that the surety underwriter organizes for the background investigation of a principal includes - correct answer Public information, including the principal's legal filings, such as lawsuits, judgments, tax liens, bankruptcies, reorganizations, and Uniform Commercial Code filings
Which one of the following identifies the most credible documents that the surety underwriter uses to evaluate the positive and negative information gathered? - correct answer SEC 10-K and 10-Q reports
Which one of the following statements is true regarding the principal as a source of underwriting information for bonding? - correct answer The principal is the primary source of direct information, including identification, historical, management, financial, bank, and performance information.
Which one of the following is a consumer credit report provider that uses a network of owned and serviced credit bureaus to provide credit information for most United States households - correct answer TransUnion
Which one of the following consumer credit report providers is identified as being used by insurers, lenders, trade creditors, merchants, public utilities, government agencies, and others? - correct answer Equifax, Inc.
Which one of the following controls the information that consumer credit report providers place in their files and how they place it? - correct answer The Equal Credit Opportunity Act and the Fair Credit Reporting Act.
Which one of the following is a consumer credit report provider that offers investigative reports based on interviews and confirms unfavorable information with two or more sources? - correct answer Equifax, Inc.
A replenishment of policyholders' surplus provided by the ceding commission paid to the primary insurer by the reinsurer is - correct answer Surplus relief
New Insurance Company noticed many insurers were withdrawing from the contractor's liability insurance market. The company believed this was a great opportunity to enter this market and earn substantial profits. New Insurance, however, lacked the experience and expertise to successfully market contractor's liability insurance, and their participation in this market was a dismal failure. New Insurance Company decided to formally withdraw from this market and to shift all future responsibility for contractor's liability claims to a reinsurer. What type of reinsurance is specifically designed to cover a whole class of business like New Insurance Company's contractor's liability insurance? - correct answer Portfolio reinsurance
An insurer's ability to provide larger amounts of insurance for property loss exposures, or higher limits of liability for liability loss exposures, than it is otherwise willing to provide is - correct answer Large-line capacity.
Reinsurance is best described as - correct answer An agreement by a reinsurer to indemnify a primary insurer for losses.
Crimson Casualty Company began insurance operations last year. The company experienced phenomenal success and wrote far more premiums than expected. A representative from the state insurance department contacted Crimson Casualty and warned the company that it was growing too fast and risking insolvency. The insurance regulator added, "Of course you can use reinsurance to help remedy your situation." The regulator was referring to which one of the following functions of reinsurance? - correct answer Using reinsurance to provide surplus relief
Which one of the following statements is correct regarding the use of treaty and facultative reinsurance? - correct answer Most treaties require that all loss exposures within the treaty's terms be reinsured.
Which one of the following statements is correct with regard to the use of facultative reinsurance? - correct answer The treaty reinsurer is usually willing to allow the primary insurer to remove high-hazard loss exposures from the treaty by using facultative reinsurance.
Which one of the following statements is correct regarding treaty reinsurance? - correct answer If treaty reinsurance agreements permitted primary insurers to choose which loss exposures they ceded, the reinsurer would be exposed to adverse selection.
Which one of the following statements regarding treaty reinsurance and facultative reinsurance is true? - correct answer Administrative costs per-risk are higher under a facultative reinsurance arrangement than under a treaty reinsurance arrangement.
In surplus share reinsurance, when is surplus ceded to the reinsurer? - correct answer When the limit of the bond is greater than the surety's retention limit, the additional amount is ceded to the reinsurer.
Which one of the following describes a type of excess of loss reinsurance that anticipates a [Show Less]