Md. Code Regs. 24.05.09.05

Current through Register Vol. 51, No. 22, November 1, 2024

Section 24.05.09.05 - Guarantied Bond Terms and Requirements

A. Guarantied bonds shall meet the requirements in §§B-K of this regulation.

B. Maximum Bond and Guaranty Amount. The Authority may guaranty up to 90 percent of all loss, cost, and reasonable expenses incurred by a surety as a result of its writing bonds for a principal on a contract. The amount of a single bond may not exceed $1,000,000.

C. Surety Bonding Line. The Authority may establish a surety bonding line in order to guaranty multiple bonds to a principal within pre approved terms, conditions, and limitations.

D. Guaranty Fees. As a precondition to the effectiveness of the guaranty, the Authority may require the principal to pay to the Authority a fee of 1/2 of 1 percent of the bond amount and the surety to pay to the Authority 20 percent of the bond premium it charges to the principal. The Authority may, however, in its sole and absolute discretion, set the premiums and fees to be paid to it for providing bonding assistance under this Program. The Authority may also require the principal to reimburse the Authority for expenses incurred in providing the guaranty.

E. Security. The bond shall be secured by a reimbursement or similar agreement including an indemnification by the principal, as well as by such other security (including any form of insurance) as may be required by the Authority.

F. Insurance. Before providing a guaranty, the Authority may require the principal to obtain hazard, casualty, liability, vehicle, business interruption, flood, workers' compensation, or other insurance. The Authority also may require that the principal or the principal's owners and managers obtain and assign to the surety and the Authority key person life insurance in an amount not to exceed the amount of the guaranty.

G. Term. The term of each guaranty may not exceed the contract term.

H. Timeliness.

(1) The Authority may not honor a guaranty of a bond that is issued before the guaranty has been approved by the Authority.

(2) The Authority may not honor a guaranty of a bond that is issued after work under the contract has actually begun without the Authority's consent. The Authority may consent to the guaranty of a bond to be issued after work under the contract has begun if the Authority receives satisfactory evidence that:

(a) The contract has been satisfactorily performed to date; and

(b) All suppliers and subcontractors have been paid to date.

I. Bond Terms. The terms and conditions of the bond shall be in accord with those generally established and accepted by the surety industry for the type of contract for which the bond is required.

J. Guaranty Terms. The Authority may vary the terms and conditions of the guaranty from surety to surety, based upon the Authority's history of experience with that surety and upon any other factor that the Authority considers relevant.

K. Economic Impact. The Authority may not approve a bond guaranty unless the Authority considers the economic impact of the contract, for which a bond is sought to be guaranteed, to be substantial. To determine the economic impact of a contract, the Authority may consider:

(1) The amount of the guaranty obligation;

(2) The terms of the bond to be guaranteed;

(3) The number of new jobs that will be created by the contract to be bonded; and

(4) Any other factor that the Authority considers relevant.

Md. Code Regs. 24.05.09.05

Regulation .05 amended effective August 3, 1992 (19:15 Md. R. 1394)