COVID-19 Pandemic Sparks Innovation in the Surety Industry

On Monday, April 6th, 2020 the Surety & Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) issued a joint Request for Emergency Action to federal, state, and local municipalities to accept the electronic execution and delivery of commercial and contract surety bonds.  Many contract surety bonds still require raised seals, which can be a challenge given the current pandemic requiring many in the surety industry to work remotely.

It is imperative to adopt a new standard that allows for the electronic execution of bonds, as many construction projects are infrastructure related to health and safety. The joint request memo urges officials to adopt the following:

  1. With respect to all construction bonds, public procurement officials shall accept all bonds and powers of attorney containing e-signatures and e-corporate seals affixed to each document, and waive the notary requirement.
  2. With respect to all commercial surety bonds, government officials shall accept all bonds and powers of attorney containing e-signatures and e-corporate seals affixed to each document, and waive the notary requirement.

Numerous sureties have quickly adapted to the current pandemic by creating electronic powers of attorney and electronic seals. Software programs have also enabled contractors to submit bid proposals online, with electronic bid bonds. Many license and permit bond requirements have evolved in recent years to allow for electronic execution.

The SFAA and the NASBP have combined their resources to create an immediate request for the adaptation of electronic execution of surety bonds. The joint request has addressed federal and state laws FAR 28.106-1 & GSAR 528.2020 and requested that they are amended to accommodate the current pandemic. If amended this would promote a more conducive and efficient method of bond executions that would be beneficial in the current crisis. This would also mark a significant adaptation in the surety industry. Shipping costs would be eliminated, overhead costs would be reduced and overall efficiency would create a more streamlined process of purchasing bonds.

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