Industry Licensing Requirements

In Canada, surety bonds may only be issued by companies licensed to do so, either federally, or by one of the provincial insurance regulatory bodies. The requirements to obtain such a license are demanding and applicants are required to demonstrate financial solvency and sufficient strength to meet potential claims obligations. The Surety Association of Canada strongly supports these stringent requirements as they ensure that only qualified firms involve themselves in our business. Indeed, only licensed surety companies may become members of the Surety Association of Canada.

One of the primary mandates of our association is ensuring that the integrity and reputation of the surety industry in Canada is maintained. As part of this effort, we encourage purchasers of construction services to secure their investment with performance and payment bonds issued by reputable, licensed sureties.

Unfortunately, our association often encounters unlicensed firms that have not been subjected to any regulatory scrutiny who hold themselves out to the construction community as a viable alternative to reputable licensed sureties. We suspect that any investigation would reveal that they do not meet minimum capitalization requirements for any jurisdiction. Indeed even the limited history of these firms has proven the validity of these suspicions as at least three have fallen into insolvency.

While many of these firms are domiciled in Quebec, our members have also encountered unlicensed bonding companies from the U.S.A. and even from remote offshore locations such as the Caribbean and Europe.

SAC is concerned that an uninformed owner or their representative may accept a surety bond from such an organization only to discover that they are unable to meet their obligations in the event of a claim. This would reflect badly upon the entire industry with reputable firms being tarred with the same brush.

Whenever we encounter an unlicensed surety, SAC will endeavour to alert the regulatory authorities in the relevant jurisdiction and lobby to have a "Cease and Desist" order issued. However, this is a cumbersome and time consuming process and often by the time such an order is issued the damage has already been done.

The Surety Association of Canada strongly advises construction purchasers to require bonds from all contractors providing construction services and to insist that these bonds be issued by insurance/surety firms which are duly licensed in the province where the work is taking place. In order to avoid any ambiguity at the time of tender, we recommend the use of the following language in tender documents.

"Only bonds issued by firms licensed to issue surety bonds in [jurisdiction in which work is undertaken] will be accepted as per the terms and conditions of the tender documents."

The Surety Association of Canada is prepared to assist construction purchasers in their efforts to protect themselves. We will always alert regulatory authorities whenever we encounter an unlicensed surety and lobby to have these firms cease operations. Anyone wishing a copy of the list of unlicensed sureties that SAC has identified or having concerns or questions should contact us at 905-677-1353. Or by fax at 905-677-3345 or email at surety[at]suretycanada.com