Surety Bond

Need a surety bond for a tender, contract, licence, permit, customs requirement or court filing? BIIS helps contractors and businesses in BC and Ontario understand their bond requirements, prepare the necessary information and approach suitable surety markets.

What Is a Surety Bond?

A surety bond is a written three-party agreement that guarantees the performance of an obligation. The surety provides financial assurance to the obligee that the principal will meet the requirements of a contract, licence, permit, court order or other obligation.

A surety bond is different from conventional insurance. It protects the obligee rather than the principal. If the surety pays a valid claim, the principal is generally required to reimburse the surety under the terms of the indemnity agreement.

The Three Parties

• Principal: The individual or business whose obligation is guaranteed, such as a contractor performing work.
• Obligee: The party requiring and receiving the bond, such as a project owner, government department, regulator or court.
• Surety: The licensed insurer that issues the bond and guarantees the principal’s obligation, subject to the bond wording and limit.

Types of Surety Bonds

BIIS arranges a range of surety bonds for clients in British Columbia and Ontario. The right bond depends on the wording required by the obligee and the obligation being guaranteed.

Contract Surety Bonds

Contract bonds help contractors qualify for tenders and provide financial assurance to project owners. Common contract surety bonds include:

• Bid Bond: Supports the contractor’s commitment to enter into the contract at the submitted price if the bid is accepted.
• Agreement to Bond: Indicates that the surety is prepared to provide the required final bonds, subject to its conditions.
• Performance Bond: Guarantees the contractor’s performance of the bonded contract.
• Labour and Material Payment Bond: Provides payment protection for eligible subcontractors, suppliers and labourers.
• Maintenance, Supply and Other Contract Bonds: Address obligations such as correcting defects, supplying materials or meeting other contract requirements.

Commercial Surety Bonds

commercial bonds in BC and Ontario guarantee obligations created by legislation, regulations, licences, permits or commercial agreements. They may include:

• Licence and permit bonds
• Canada customs and excise bonds
• Prepaid contractor bonds
• Direct seller and collection agency bonds
• Auto dealer, travel agency and vocational school bonds
• Other bonds required by government authorities or contractual counterparties

Fiduciary and Court Bonds

Fiduciary bonds may be required by a court or public authority when a person is responsible for another person’s estate or property. BIIS can assist with Estate Administration Bonds, foreign executor bonds, guardianship bonds and committee bonds, subject to underwriting approval.

Important Characteristics

• A form of credit: The surety expects the principal to complete the obligation and generally seeks reimbursement if it must pay a valid claim.
• Underwriting is required: The surety may review financial strength, experience, credit, the obligation and the requested bond amount.
• The bond has a limit: The bond amount, sometimes called the penal sum, is the maximum amount payable under the bond, subject to its terms.
• The term depends on the obligation: Some bonds have a fixed expiry or cancellation provision, while others remain in force until the obligation has been completed or released.
• The wording matters: The required bond form, contract and governing legislation determine the obligations and claims process.

Who May Need a Surety Bond?

• General contractors, subcontractors and service contractors
• Heavy-equipment contractors, suppliers and manufacturers
• Gas and electrical contractors
• Trucking operators, customs brokers and warehouse operators
• Breweries, distilleries and duty-related businesses
• Driving schools, vocational schools and temporary foreign worker recruiters
• Auto dealers, travel agencies and direct selling businesses
• Executors, administrators, committees and guardians

How to Get a Surety Bond

1. Confirm the requirement. Obtain the bond form or written instructions from the obligee, including the bond type, amount and deadline.
2. Contact a surety broker. Send BIIS the requirement so we can identify the information and market needed for the application.
3. Provide underwriting information. Requirements vary, but may include financial statements, ownership information, experience, contracts and work-in-progress details.
4. Review the terms. The surety will assess the application and may request clarification, security or an indemnity agreement.
5. Issue and deliver the bond. Once approved and paid, the bond is executed and provided in the form required by the obligee.

Information Needed for a Quote

Providing the following information at the beginning can help avoid delays:

• The bond form or a copy of the requirement
• Bond type and amount
• Name of the obligee
• Required effective date or tender closing date
• Legal business name, ownership and operating history
• Financial statements or credit information requested by the surety
• For contractors, project details, completed-project history and current work in progress

How Much Does a Surety Bond Cost?

Surety bond pricing varies by bond type, amount, term and the applicant’s financial and credit profile. Contract surety pricing may also reflect the contractor’s experience, working capital, project size, backlog and bonding program. Because each obligation is different, the most reliable way to determine the cost is to provide the required bond form and application information for review.

Ontario Public Construction Requirements

Ontario public construction contracts with a contract price of $500,000 or more are generally subject to statutory performance bond and labour and material payment bond requirements. The minimum coverage is generally 50% of the contract price, subject to the legislation, regulations, project terms and applicable exceptions. Contractors should review the tender documents and current Ontario regulations before bidding.

Why Work With BIIS?

• Broker representation: Unlike a direct insurer, we work with clients to understand the requirement and approach available surety markets.
• Broad bond experience: We assist with contract, commercial, customs, licence, permit, fiduciary and court bond requirements.
• Regional service: Our Vancouver and Toronto offices assist businesses in BC and Ontario.
• Multilingual support: English, French, Japanese and Chinese assistance is available, depending on the office and service.

Frequently Asked Questions

Is it the same as insurance?

No. Insurance generally protects the insured from covered losses. A surety bond protects the obligee if the principal fails to meet the bonded obligation. The principal is generally responsible for reimbursing the surety for a valid claim payment.

How long does it take to obtain one?

Timing depends on the bond type, amount, wording and completeness of the application. Simple commercial bonds may require less information than a contractor bonding program. Tell us your deadline as early as possible so we can confirm the requirements and available options.

Can a new business qualify?

Possibly. The surety may consider the owners’ credit, experience, financial resources, business plan and the size and type of obligation. Approval is not guaranteed, but complete information helps the underwriter assess the application.

What if I do not know which bond I need?

Send us the document or instructions provided by the project owner, regulator, government department or court. We can help identify the bond category and the information likely to be required.

Can BIIS help with an electronic bond?

Electronic bond availability depends on the bond type, surety and obligee requirements. Let us know the tender platform, required format and closing time so we can confirm the available process.