What Surety Underwriters Want to See in Your File in 2026

Author: Grit Insurance Group

If you have ever been asked for a bond and wondered what the surety actually looks at before they say yes - or no - here is the real answer. Not the marketing version. The underwriter's version.

Surety underwriting is not a black box. It follows a consistent framework that has been refined over decades. Once you understand what the underwriter is evaluating and why, you can build a file that tells your story clearly - and positions your company for higher bonding limits, faster approvals, and better terms.

This is the playbook. Every section below reflects what surety underwriters across the industry are trained to evaluate - and what the best-prepared contractors already know.

The 3 Cs: The Framework Every Underwriter Starts With

Every surety underwriting decision starts with the same three pillars: Character, Capacity, and Capital. These are not buzzwords. They are the actual categories an underwriter uses to organize their risk assessment of your company.

Character

Character has nothing to do with whether you are a nice person. It is about how you run your business and how you handle problems when they show up.

Underwriters evaluate your personal and business credit history, your payment track record with subcontractors and suppliers, any past bond claims or lawsuits, tax liens or judgments, and your reputation in the market. They pull credit reports. They check references. They look at how you handled the last project that went sideways.

As one veteran surety underwriter at Old Republic Surety put it: character is the first C because in many ways it is the most important. The math matters, but the math only works if the person behind it is trustworthy.

Contractors who bring issues to the surety's attention proactively - before they become surprises - build trust that pays dividends in bonding capacity over time.

Capacity

Capacity is your ability to actually do the work. Not just win the bid - finish the job.

The underwriter evaluates your experience with similar project types and sizes, the depth of your management team (estimators, project managers, superintendents), your equipment and labor resources, your estimating and accounting systems, and your track record of completing bonded work on time and on budget.

Here is the key insight most contractors miss: if the owner is the only person who can run a project from start to finish, the surety sees a single point of failure. That limits capacity regardless of how strong the financials are. Management depth matters. We will come back to this when we talk about perpetuation planning.

Capital

Capital is the numbers. This is where the underwriter spends the most time, because the financial picture tells the story of whether you can absorb a hit on a bad job and still keep your other projects moving.

The key metrics:

• Working capital (current assets minus current liabilities) - this is often the single most important number in surety underwriting
• Net worth (total assets minus total liabilities) - shows the equity cushion protecting the surety
• Profitability trends - consistent earnings matter more than one great year
• Cash flow - money actually moving through the business in a healthy pattern
• Debt-to-equity ratio - too much debt relative to equity raises a red flag

According to industry benchmarks, sureties generally apply a multiple of 10 to 20 times adjusted working capital to estimate your aggregate bonding capacity. A contractor with $500,000 in working capital could qualify for a $5 million to $10 million bonding program. A contractor with $3 million in working capital might carry primary capacity of $50 to $60 million with a strong track record.

That multiple is not fixed. It moves based on everything else in the file - your experience, your systems, your WIP performance, and the surety's confidence in your management team.

Financial Statement Requirements: What Level You Need and When

Not every bond program requires the same financial reporting. Sureties scale their requirements based on program size. Here is the general framework, based on data from Commercial Surety (CSBA) and Integrity Surety:

• Bonds under $750,000: Credit-based application. A one- or two-page application with personal credit and basic business info. No CPA statements required.
• Bonds $750,000 to $2 million: Corporate financial statements required. Internal or CPA-compiled statements may be accepted if accurate and reliable.
• Bonds over $2 million: CPA-reviewed financial statements are the typical minimum. The CPA performs analytical procedures and provides limited assurance that the statements are free from material misstatements.
• Programs over $20 million in revenue: Full CPA audit. The highest level of assurance, involving full examination and verification of financial records.

Regardless of level, sureties want to see three years of year-end financial statements, prepared using GAAP and the percentage-of-completion method for revenue recognition. Year-end financials should be submitted within 90 to 120 days of your fiscal year-end. Late statements signal weak financial discipline - and underwriters notice.

One critical point: upgrading from compiled to reviewed statements is not a light switch. It typically takes 12 to 18 months as your CPA firm builds confidence in your internal controls. If you are planning to grow your bond program, start the upgrade now - not when you need the capacity.

The WIP Schedule: Your Most Important Underwriting Document

Your Work-in-Progress schedule may be the single most telling document in your underwriting file. It shows every active project with contract values, costs incurred, estimated costs to complete, billings to date, and projected profit.

Here is what the underwriter is looking at, according to analysis from Old Republic Surety and IRMI:

• Available capacity. How much of your aggregate bonding limit is currently in use? If your aggregate is $8 million and your WIP shows $7.5 million in active bonded work, there is almost no room for another project.
• Job profitability. Are your projects making money? Consistent profitability across your portfolio signals strong estimating and field management.
• Profit fade. Sureties track jobs over time to see how the estimated profit changes from start to finish. If your jobs consistently finish at lower margins than you bid them, that is a red flag.
• Overbillings and underbillings. This is where underwriters dig in. Large underbillings on late-stage projects can signal declining profitability that has not yet been recognized - which means your working capital and net worth may be overstated on your balance sheet. That directly affects how much bonding capacity the surety will extend.

The WIP should always be accompanied by a completed contract schedule showing final profit on recently finished projects. Sureties use this to verify your estimating accuracy over time.

Bottom line: if your WIP is sloppy, outdated, or does not reconcile with your general ledger, the underwriter's confidence drops before they even get to the balance sheet.

Bank Relationships and Lines of Credit

Your banking relationship matters more to the surety than most contractors realize.

The surety wants to see that you have a revolving credit facility with adequate capacity relative to your bonded workload. They evaluate the credit limit, the current balance, the terms, the maturity date, and how you are using it. According to Cavignac & Associates, a contractor should aim for a line of credit equal to roughly 50 to 75 percent of working capital.

Important nuance: most standard sureties classify your line of credit as a current liability - even if it is not fully drawn - because of the demand clause. That means it reduces your working capital calculation. The SBA Surety Bond Guarantee Program is an exception - they count available credit as working capital.

How the line is used matters as much as the limit. A contractor who draws strategically and pays down regularly demonstrates financial discipline. A contractor whose line is permanently maxed signals cash flow problems the surety will not ignore.

A long-standing relationship with a construction-focused bank also signals stability. Frequent bank changes raise questions. The surety wants to see an established lender who knows your business and is willing to provide a reference letter confirming the relationship.

Personal Indemnity: Yes, They Want Your Signature

Every contractor who obtains a bond program signs a General Agreement of Indemnity (GAI). This is a separate legal contract between you, the surety, and typically every owner with 10 percent or more stake in the company - plus their spouses.

This is the part that catches a lot of contractors off guard. As Old Republic Surety explains: the personal indemnity puts owners on notice that they have "skin in the game." Not only are they obligating their company's assets, but they are personally responsible as well.

Why spouses? To prevent asset transfers. If an owner could simply move assets into a spouse's name to avoid indemnity obligations, the indemnity agreement would be meaningless.

The GAI is standard across the industry. It is not negotiable. And it is not optional. Any contractor who balks at signing personal indemnity will find it very difficult to obtain meaningful bonding capacity.

The surety also reviews personal financial statements for all owners. They are not necessarily looking for high net worth. According to the National Association of Surety Bond Producers (NASBP), the purpose is to examine how owners handle their personal finances - because that tells the underwriter something about how the business finances are managed too.

The Thing Most Contractors Forget: Perpetuation Planning

Here is the question every surety underwriter asks that most contractors are not prepared for: What happens to this company if something happens to you?

If you are the sole owner-operator and the only person who can run your bonded projects, the surety has a problem. They are guaranteeing those projects will be completed. If you are in the hospital or worse, who finishes the work?

This is not a life insurance pitch. This is a bonding capacity lever.

According to Surety Bond Quarterly, surety bond underwriters evaluate the successor's credentials and experience to maintain bonding lines during any ownership transition. The financial health of the business will be reassessed by bond underwriters to ensure ongoing surety support.

What sureties want to see in a perpetuation plan:

• Identified successor or second-in-command who can run projects if the owner is unavailable
• Key person life insurance - company-owned, sized to the bond program - that provides financial continuity
• Buy-sell agreement for multi-owner companies, funded by life insurance
• Documented project continuity plan showing how bonded work gets finished
• Cross-trained employees who can step into critical roles

Contractors who demonstrate a clear perpetuation plan get higher limits. The surety sees reduced key-person risk, which directly translates to increased confidence and increased capacity. That is a concrete financial argument for building your plan now - not when the surety asks for it.

Learn more about how perpetuation planning connects to bonding capacity on the Grit Insurance perpetuation planning page.

The 2026 Market Context

The surety market in 2026 is not a hard market in the traditional sense. But it is a market with longer memories. According to a 2026 surety forecast from TSIB, defense and cost containment expenses as a percentage of earned premium rose from 1.9% in 2022 to 2.9% in 2024, per SFAA data. More jobs require active intervention, completion contractors, and litigation.

What this means for contractors building their underwriting file:

• Sureties are paying closer attention to cash flow, underbilling trends, and key-person dependency
• Informal financial practices that were overlooked in a more forgiving market are now being questioned
• Small contractors who invest in financial discipline, work with construction-focused CPAs, and manage backlog conservatively will continue to find surety support
• U.S. public construction spending is running at approximately $521.7 billion (seasonally adjusted annual rate), according to Acrisure - which means there is plenty of bonded work available for contractors who are properly positioned

Your Underwriting File Checklist

Here is the full list of what a surety typically wants in your file. If you are missing items, start filling the gaps now - not when you need a bond next week.

1. Three years of CPA-prepared year-end financial statements (level based on program size)
2. Current interim financial statements (tied to the last CPA-prepared version)
3. Current Work-in-Progress schedule with completed contract schedule
4. Personal financial statements for all owners
5. Bank reference letter and line of credit documentation
6. Accounts receivable and accounts payable aging reports
7. Company resume with project history, key personnel bios, and equipment list
8. Insurance information - EMR, safety program, OSHA history
9. Corporate documents - articles of incorporation, bylaws, operating agreement
10. Perpetuation/continuity plan - successor identified, key person life insurance, buy-sell agreement
11. Signed General Agreement of Indemnity (all owners and spouses)

For a detailed, downloadable version of this checklist, visit the Grit Insurance surety hub.

Frequently Asked Questions

What financial statements do I need for surety bond underwriting?

For bonds under $750,000, most sureties will work from a credit-based application with basic financials. For bonds between $750,000 and $2 million, you will need corporate financial statements - internal or CPA-compiled may be accepted. For bonds over $2 million, CPA-reviewed financial statements are typically the minimum requirement. Programs over $20 million in revenue generally require full CPA audits. All financial statements should follow GAAP and use the percentage-of-completion method for revenue recognition.

How do sureties calculate bonding capacity from working capital?

Sureties generally apply a multiple of 10 to 20 times your adjusted working capital to estimate aggregate bonding capacity. For example, $500,000 in working capital could support a $5 million to $10 million bonding program. Working capital is calculated as current assets minus current liabilities, but sureties adjust this figure by removing receivables over 90 days old, intercompany loans, and certain less-liquid assets.

Why do sureties require personal indemnity from business owners and spouses?

A surety bond is not insurance - it is a financial guarantee. The General Agreement of Indemnity ensures that business owners (and their spouses, to prevent asset transfers) have personal skin in the game. If the surety has to pay a claim on your behalf, the indemnity agreement gives them the legal right to recover those costs from you personally. This requirement is standard across the industry, and any business owner with 10% or more ownership stake typically must sign.

What is a WIP schedule and why do sureties care about it?

A Work-in-Progress schedule is a detailed report of every active project, showing contract values, costs incurred to date, estimated costs to complete, billings, and projected profit. Sureties use it to assess how much of your bonding capacity is currently in use, whether your jobs are profitable, and whether your billing practices are healthy. Underbillings on late-stage projects are a red flag because they can signal declining job profitability that has not yet been recognized in your financial statements.

What is the one thing most contractors forget when applying for a surety bond program?

Succession and perpetuation planning. Sureties guarantee bonded projects will be completed, so they need to know what happens if the owner gets sick, gets hurt, or decides to retire mid-project. Contractors who have an identified successor, key person life insurance, a buy-sell agreement, and a documented project continuity plan get higher bonding limits. It is a bonding capacity lever, not just a life insurance conversation.

Build a File That Gets to Yes

Surety underwriting is not a mystery. The underwriter is asking one question: Can this contractor keep its promises? Your file is the answer.

Build it with clean financials, a current WIP, strong references, a solid banking relationship, and a perpetuation plan that shows the company outlasts any single person. Do that, and you will not just get bonded - you will get the capacity, terms, and speed that let you chase the work you actually want.

If you are not sure where your file stands today, the Grit team can walk through it with you. We review underwriting packages every day, and we will tell you exactly what needs to happen before you submit.

Call the Grit team directly: (801) 505-5500

Or take the Bond Scorecard to see where your company stands right now.