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.
Only firms that are licensed to sell surety bonds in Canada may become members of the Surety Association of Canada.
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:
"The successful bidder shall provide a performance bond in the format of CCDC 221 and a labour and material payment bond in the format of CCDC 222 each in the amount of 50% of the contract price. Bond so provided must be issued by a surety company licensed to issue surety bonds in <name of jurisdiction>."
The Surety Association of Canada is prepared to assist construction purchasers in their efforts to protect themselves. If you encounter an unlicensed surety, please contact us at (905) 677-1353 or by email at surety [at] suretycanada.com.