Think of careers in finance and the surety bond industry may not come to mind. Yet the field is a lucrative and rewarding career path for today’s young professionals. Mihaylo Finance Alumnus and Executive Council President Dan Huckabay ’03 discusses how students and alumni can position themselves for success in this field.
When Bob Foster came to Commercial Surety Bond Agency (CSBA) in 1989, he was seeking support for a $7,000 subcontract. Today, his contracting company, R.C. Foster Corporation, is leading the construction of water treatment plans in Southern California, including a $6.8 million project in Corona, and is still a loyal client of CSBA. From real estate development to freeway construction, building projects are the lifeblood of the Southern California economy. Local governments, school districts, universities and housing developers rely on surety bonds to ensure that projects will be completed on time.
As baby boomers retire, the industry is seeking new professionals, with most insurance companies actively seeking to fill positions such as underwriters. Alumni who enter the field often have finance, accounting or banking backgrounds.
What is the Surety Bond Industry?
“The surety industry is a part of the insurance industry, representing about 1% of the overall premiums written annually,” says Dan Huckabay ’03, who has been the president of CSBA since 2003. “Surety bonds are provided by insurance companies. They are purchased by customers, who are called principals, to provide a guarantee to a third-party, known as the obligee. Most of the bonds we write relate to public works construction, including schools, roads, bridges and municipal buildings, as required by law in order to protect taxpayer money that is funding the projects. In those instances, a contractor is obtaining a bond from a surety company and providing it to the public agency or school, such as Cal State Fullerton. The bond guarantees that the contractor will build the project according to the specifications of the contract. If they don’t, the surety will pay to get it completed.”
Surety Bonds: Today and Tomorrow
Surety bond employment is undergoing a major demographic change as the older baby boomers retire and a new generation of young professionals takes their place. At the same time, technology is transforming the field, with a push to automate data entry, which would likely translate into more work done by fewer people. Huckabay envisions a future in which the human underwriter still plays a role. “My guess is some of the analysis of the financial information will be automated, although you will always need a trained underwriter to make the final decision, because there are a lot of intangibles that factor into writing bonds, such as evaluating the character of the owner and management of a business,” he says.
After some rough times in the wake of the Great Recession, the surety bond field, like the insurance industry generally, is doing quite well today. “There has been growth in premium volumes and a gradual decline in the losses being paid out under the bonds for the last couple years. This leads to profitability just like the overall insurance industry,” he says. “With the overall improvement in the economy, there has been more private building, some of which uses surety bonds, as well as an increase in public spending on infrastructure, schools and municipal projects. All of this requires surety bonds and has led to an increase in premiums.”
Finding Your Surety Bond Niche
Thinking a surety bond career should be part of your future? Huckabay notes that several institutions, including Liberty Mutual and The Hartford, recruit on campus at Cal State Fullerton. Insurance industry opportunities are posted on the Center for Insurance Studies website. Students and recent alumni can find out more about business-related career events and development from Mihaylo Career Services, which is open for walk-in advising 11 a.m. to 2 p.m. on Mondays, Tuesdays, Wednesdays and Fridays, and 11 a.m. to 6 p.m. on Thursdays at SGMH 1409.