In a fast-paced, continuously evolving world, the logistics of the Surety Industry have remained constant and quite traditional for the most part through the ‘insurtech’ revolution. Paper bond copies, “wet” signatures, and courier services are still an integral part of bonding and how surety bonds are managed.
Well, all of that could be about to change with the introduction of the COVID-19 (Coronavirus) Pandemic and health concerns surrounding paper document copies, delivery services, and in person interactions. Is this a blessing in disguise for the bonding industry? Is a health concern like this what was needed to finally make the jump to standardized digital surety bonds? We believe so!
What are Digital Surety Bonds?
Digital Surety Bonds or e-bonds are electronic versions of surety bonds that serve the same purpose as traditional bonds; however, there is no ‘hard’ or paper copy of the document. In the past, one of the primary concerns with respect to the option to use electronic bonds was the potential for forgery and the problem of document alterations via PDF editing software or other means.
With modern technologies such as blockchain and AI, it’s since been determined that digital versions of documents can in fact be much more secure than traditional paper versions, even when utilizing individuals signatures, corporate seals, etc. The three parties involved in any surety agreement can now all be privy to the same information in real time with this technology. True security and transparency for all guarantees, cancellation clauses, and other verbiage applicable to bonding arrangements.
Why has there been a hesitance to implement e-bonds?
As we mentioned previously, the main concern has been forgery, counterfeiting, and falsification.
For the most part, the decision to accept e-bonds has remained in the hands of owners / obligees that require bonding as a form of security to make the leap to digital. This may have been due to the lack of knowledge or understanding of the options currently available in the electronic bonding market.
In 2009, the Surety Association of Canada (SAC) provided a required criteria for any e-bonding or electronic surety documents. Some of the notable requirements provided by SAC for e-bonds are as follows…
Integrity of Content – The assurances that the document received is the true document executed and the content has not been changed or altered.
Secure Access – Restricting the access to the document to those authorized to view and/or download it.
Verifiability / Enforceability – Assurances that the document was duly executed by the parties identified and that is enforceable in law.
Now is the time that obligees are taking notice and considering mandatory implementation for digital bonding in the commercial surety and contract surety space. Let’s delve into how this will likely play out in various fields of the industry.
How e-bonds are currently being implemented
E-bond acceptance is taking off at a rapid pace. In terms of contract bonding including tender and final bonds, this has been around for quite some time, but only implemented on the rare occasion by owners and obligees.
In conjunction with the rules outlined by SAC, there are currently a few major players in the digital surety bond space that facilitate contract bonds. We’ve outlined a few below including some notable points on our experience with each (Please note: all information is as of April 2020 and subject to change):
- BidCentral – Infinite Source (This entity is no longer operating as of May 2020)
- Must be initiated at the obligee level
- Great interface
- Charges apply on a per user basis as well as per signature
- Xenex – SignatureMaster
- Available support staff
- Broker / surety provider uploads bond document for digital verification
- All parties must register
- Mobile Bonds
- Capabilities to upload bonds similar to Xenex
- Verification process to confirm nothing has been altered on said document
These are all third party signature / bonding verification solution providers that charge for their services. They have proven useful as a contract surety tool for principals, brokers, and obligees alike. However, with new industry standards it is only a matter of time that broker and surety providers create and implement their owns solutions to the new e-bonding standards.
Netsurance is currently working with insurtech software provider BrokerLift (brokerlift.com) to launch an e-bond platform for small commercial surety bonds. Various licensing authorities are now showing interest in this option due to SAC’s recommendations for digital bonds during the COVID-19 pandemic.
This will be a permanent solution solving delays caused by hard copy paper documents, courier services, and communication issues revolving around bond validity.
What types of bonds can be issued electronically?
As for the kinds of surety bonds that may be issued digitally, the list is endless…
Any security that could be facilitated with paper documentation can be implemented electronically. Over the coming weeks and months, we expect to see the following and more be mandated as e-bonds:
- Bid Bonds
- Consents of Surety / Agreements to Bond
- Performance Bonds
- Labour & Material Payment Bonds
- Maintenance Bonds
- License & Permit Bonds
- Customs Bonds
- Electrical Bonds
- Gas Bonds
- and more
Don’t hesitate to contact us if you’d like to implement e-bonds for your guarantees.
The future of digital surety & e-bonding
In conclusion, e-bonds are here to stay and are the way of the future for the surety industry as a whole. This evolution is long overdue, but with the cooperation of all of the parties involved in surety security agreements, the change-over can be quick, painless, and much more efficient. Congratulations Surety! Welcome, to the modern age of technology.