NU Online News Service, Feb. 23, 3:38 p.m. EST
Trade groups that represent surety insurers are calling the failure of a Pennsylvania-based surety insurer "highly unusual," and maintaining that the "industry remains reliable and strong."
The statements, issued by the National Association of Surety Bond Producers (NASBP) and the Surety & Fidelity Association of America (SFAA), representing surety companies, were prompted by the announcement last week that First Sealord had been placed in receivership.
The company's problems were linked to the troubled construction market.Pennsylvaniaregulators determined that First Sealord was insolvent and had insufficient funds to meet its obligations.
The NASBP and SFAA say professional surety bond producers and companies "stand ready to provide assistance to those affected by the First Sealord liquidation and to minimize any inconvenience to the principals and obligees."
Furthermore, they say, "Surety bond producers will help their clients mitigate the effect of the First Sealord liquidation, including, where appropriate, identifying suitable replacements for cancelled [First Sealord] bonds."
The trade groups say that for claimants on First Sealord bonds, some state insurance guaranty funds cover surety claims.
The industry statement also says, "The surety industry remains reliable and strong and, as a whole, has weathered a challenging economic environment well."
Pennsylvaniawas given state court go-ahead to liquidate the company Feb. 8 after an attempt to sell the troubled company to Global specialty insurer Torus in December was called off.
First Sealord had experienced a steep drop in its surplus after creditors had gone after the surety bonds in numerous cases throughout the country where construction companies or builders had failed to complete projects or pay for them.
The statement says, "The decisive actions of the Pennsylvania Insurance Department and the Commonwealth Court of Pennsylvania exemplify the regulation and oversight the surety industry receives to protect the public interest and minimize losses in a liquidation action."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.