Depository bonds are a type of surety bond. These bonds guarantee that deposits over the FDIC limits are safe. The bond is a source of payment to certain depositors if the bank collapses. Given what’s happening in the banking system, many sureties are canceling, not renewing, and telling their brokers to replace their surety bonds with another surety.
This is problematic for many reasons; it creates a lot of tension. There are problems for both the clients that obtain the bond — the Bank — and their obligee — their depositor. The Bank may have a depositor that they value and want to keep, but informing them that the bond that is going to protect them in the event that FDIC limits do not cover a certain amount of their deposit could lead to that individual changing banks. Banks do not want this.
In some circumstances, the surety company that is canceling or non-renewing a bond may be in fact correct, given an individual bank’s overall financial health. There are many situations where they are being too cautious. The surety industry as a whole has been known to throw the baby out with the bath water when viewing risks and certain industries as a whole, instead of looking at each risk individually. At Pedersen & Sons Surety Bond Agency, Inc. we work with some forward-thinking surety companies which will look at certain risks individually and will evaluate each situation on a case-by-case basis.
If your current broker is unable to replace your account, or you’re unhappy with them, it’s time to make a change. Give us a call. We primarily specialize in court, commercial, miscellaneous, and transactional bonds.
Given the situation going on in the banking sector right now, a lot of our clients have been turning to us to help out their clients and replace other types of bonds. With a long history of providing solutions that others can not provide, we have built specialties in several areas of the surety market.
We look to solve problems. We provide solutions to your headaches. So, give me a call for a free, confidential consultation. We’d love to begin working with your clients for their depository bonding needs, as well as any other surety bonds that may arise.
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