Annual Letter A Annual Letter for Executive Officers

DEPARTMENT OF THE TREASURY
BUREAU OF THE FISCAL SERVICE
WASHINGTON, DC 20227
OMB No. 1530-0014 (A)
For Paperwork
Reduction Act Statement
and Burden Estimate
Statement: See Last Page
of Letter

December 31, 2024

ANNUAL LETTER TO EXECUTIVE OFFICERS OF
SURETY COMPANIES REPORTING TO THE
DEPARTMENT OF THE TREASURY
Congress authorized the Secretary of the Treasury (the Secretary) in 31 U.S.C. §§ 9304-9305 to
certify a surety company to do business with the United States if the Secretary determines that the
company meets certain conditions and is able to carry out its contracts. Treasury has published its
requirements for companies applying to underwrite or reinsure federal bonds at 31 C.F.R. Part 223.
Per 31 C.F.R. 223.2(b), the Annual Letter to Executive Heads of Surety Companies (Treasury Annual
Letter) provides the timeframes and process for submitting the requisite financial data of certified
companies and reinsurers.
Furthermore, 31 C.F.R. 223.9 grants authority through the Treasury Annual Letter to establish the
financial analysis methodology for the valuation of assets and liabilities for participating corporate
surety companies holding certificates of authority and/or recognized as admitted reinsurers.
Therefore, the Treasury Annual Letter establishes the valuation methodology to ensure corporate
surety companies are financially solvent and able to perform on all bonds underwritten.
PLEASE NOTE:
 This letter and all forms are available on our website:
https://fiscal.treasury.gov/surety- bonds/downloads.html
 Section III: Requirements for insurance subsidiaries.
 The U.S. Department of the Treasury, Bureau of the Fiscal Service, published new regulations for the
Surety Bond Program on June 10, 2024. The Final Rule, updated regulation, and implementation guide
can be found on our website. Please note that the new regulations are effective August 9, 2024.
The 2024 Annual Statement NAIC File Upload (s.txt file only) of all companies holding a Treasury
Certificate of Authority must be filed with the Department of the Treasury (Treasury) no later than
March 1, 2025.
Annual Statement NAIC File Upload (s.txt file only) should be filed for your company as well as for
all insurance company subsidiaries shown on the year-end Schedule D. The Annual Financial
Statement Jurat Page must be signed and sworn to by the company’s President and Secretary or if
being signed by someone other than the President and Secretary, must be signed and sworn in
accordance with the state requirements and provide the state provision in support. The form must be
notarized (wet or electronic signatures and notary seals are acceptable) for the reporting company
and all insurance company subsidiaries shown on Schedule D.
The NAIC File Upload (s.txt file only) must be in accordance with the NAIC Annual Statement Filing
Specifications. Please note Treasury must be notified if the company's Annual Statement NAIC File
Upload (s.txt file only) is rejected by the NAIC, faulty in any way, or has submitted an amended 2024
annual statement.

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All forms are provided via the following link: https://fiscal.treasury.gov/suretybonds/downloads.html
Forms must be completed and made a part of the company's filing that includes a completed
checklist. The forms are:
 Annual Filing Checklist – Certified Surety/Certified Reinsuring Companies
 Schedule of Excess Risks (See Section VIII in attached letter)
 Surety License Sheet (See Section XIV)
 Treasury Schedule F (See Section VII)
 Quarterly Report of Federal Business Written and/or Outstanding – to be used by Certified
Surety Companies
Treasury regulations at 31 C.F.R. § 223.22 provide for the collection of a fee applicable to renewal
of Certificates of Authority. The fee of $8,800 is due February 15, 2025.
To pay your fee, go to the following website (https://www.fiscal.treasury.gov/surety-bonds/)
and select “PAY ONLINE”.
You may pay online by credit card or ACH Debit. We accept American Express, Discover, Visa and
Master Card. If the company chooses to pay via ACH debit, the company must first make sure that
there are no restrictions on debit activity for the bank account the company plans to use for their
renewal fee payment. Checks are not accepted.
The timely submission of the required data in support of the annual reporting (e.g., financial
statements and related supporting documents of subsidiary companies, real estate appraisal reports,
actuarial opinions, NAIC Ratios management explanations for unusual results, explanatory
memoranda, etc.) is the responsibility of the reporting company. All information is:
 due March 1, 2025, and
 sent electronically by email to surety.bonds@fiscal.treasury.gov
In the event that the company is no longer wanting to participate in the Federal Surety Bond Program,
the company is advised to notify Treasury of their intention to withdraw from Treasury’s list of certified
companies.
The Annual Calendar of Filings on pages 3 & 4 will be a convenient guide to all companies for
reviewing filing requirements and due dates at a glance. Annual and quarterly filing checklists are
available on our website to assist you in making complete filings by the specified due dates. The
checklists must be returned to Treasury with your filings.

Melvin Saunders
Manager
Surety Bond Branch

Enclosures

SURETY BOND BRANCH ~ 200 THIRD ST ~ RM. 1010
PARKERSBURG, WV 26106
https://fiscal.treasury.gov/surety-bonds/

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ANNUAL CALENDAR - 2024 FILINGS FOR COMPANIES
HOLDING A TREASURY CERTIFICATE OF AUTHORITY
Due February 15 (or the following business day if the 15th falls on a weekend)
Renewal Fee of $8,800
Due March 1 (or the following business day if the 1st falls on a weekend)
(Refer to the checklist posted on our website as well)
 Annual Financial Statement Jurat Page signed and notarized for reporting company and all
insurance company subsidiaries shown on Schedule D


NAIC File Upload (s.txt file only) for reporting company and all insurance company subsidiaries
shown on Schedule D



Schedule of Excess Risks* – signed and notarized. The Schedule of Excess Risks must be
submitted in two forms - a PDF (signed and notarized) and an MS Excel document



Treasury Schedule F* (ceded reinsurance only). The Treasury Schedule F should be submitted as an
MS Excel document. Note: The Schedule F included in the company’s Annual Statement reporting
assumed reinsurance is sufficient for Treasury rating purposes. However, if Schedule F – Part 1 of
the company’s Annual Statement showing their assumed reinsurance is not included in the company’s
Annual Statement filed by March 1, it can be submitted separately no later than April 1.



Surety License Sheet* (including the state Certificate of Authority for any new states added)



Statement of Actuarial Opinion



Report of Federal Business, Written and Outstanding during the quarter* (4th quarter 2024)



A completed annual checklist* of the items furnished (including contact name,
phone number and email address), and ensure that all items checked have been
provided with the filing. Please note, we do not require the Insurance Expense
Exhibit to be filed or the PDF format of the Annual Financial Statement.

Due Apr 1
 Management Discussion and Analysis (MD&A)
Due May 1 (or the following business day if the 1st falls on a weekend)
 IRIS Ratio Management explanations for unusual results.
Due May 15 (or the following business day if the 15th falls on a weekend)
 Signed and notarized quarterly Jurat (1st qtr. 2025)


Quarterly Financial Statement NAIC File Upload (s.txt file only) (1stqtr. 2025)



Schedule of Excess Risks* (1st qtr. 2025)



Report of Federal Business Written and Outstanding during the quarter* (1st qtr. 2025)



A completed quarterly checklist* of the items furnished (including contact person information and email
address) Please ensure that all items checked have been provided with the filing.

Due June 1 (or the following business day if the 1st falls on a weekend)
 CPA Audited Financial Statements** (specific to the reporting company- Consolidated
statements will not be accepted unless approved in advance by the Surety Bond Branch)

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 CPA Report on Internal Control and the Management Letter as received
 CPA's Management Letter 10-K Report, if applicable
Due August 15 (or the following business day if the 15th falls on a weekend)
 Signed and notarized quarterly Jurat (2nd qtr. 2025)


Quarterly Financial Statement NAIC File Upload (s.txt file only) (2nd qtr. 2025)



Schedule of Excess Risk* (2nd qtr. 2025)



Report of Federal Business Written and Outstanding during the quarter* (2nd qtr. 2025)



A completed quarterly checklist* of the items furnished (including contact person information and email
address) Please ensure that all items checked have been provided with the filing.

Due November 15 (or the following business day if the 15th falls on a weekend)
 Signed and notarized quarterly Jurat (3rd qtr. 2025)


Quarterly Financial Statement NAIC File Upload (s.txt file only) (3rd qtr. 2025)



Schedule of Excess Risks* (3rd qtr. 2025)



Report of Federal Business Written and Outstanding during the quarter* (3rd qtr. 2025)



A completed quarterly checklist* of the items furnished (including contact person information and email
address) Please ensure that all items checked have been provided with the filing.

Due December 31 (or the following business day if the 31st falls on a weekend)
Request for filing consolidated CPA reports, if applicable
Due Whenever Applicable
Miscellaneous:
 NAIC Biographical Affidavits of New Officers/Directors/Others (marked with a “#” on each new period’s
Jurat). Please redact Personally Identifiable Information (PII) prior to submitting.
 Information on Changes in Reinsurance Agreements
 Information on Ownership or Name Changes
 Any additional data requested by Treasury
Due When Released by State
 State Exam Report
FAILURE TO SUBMIT THIS AND/OR ANY OTHER REQUESTED INFORMATION WHEN DUE MAY RESULT IN
REVOCATION OR NON-RENEWAL OF THE COMPANY’S CERTIFICATE OF AUTHORITY.
*Our forms are now available online at: https://www.fiscal.treasury.gov/surety-bonds/downloads.html.
**These items should be sent as early as possible.

Revised 12/2024

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INSTRUCTIONS – ANNUAL AND QUARTERLY FINANCIAL STATEMENTS SUBMISSIONS
OF SURETY COMPANIES REPORTING TO THE DEPARTMENT OF THE TREASURY
These instructions are for the general guidance of surety companies seeking or holding a Treasury
Certificate of Authority. The guidelines set forth below are used by Treasury for valuing assets
and liabilities in accordance with 31 C.F.R. Part 223. As noted in parts 223.9 of 31 CFR, Treasury
issues instructions and guidelines to companies via Annual Letters regarding the valuation of assets
(including investments) and liabilities. Treasury also requires, in 31 CFR 223.8, the submission of
annual and quarterly financial statements. This Annual Letter provides specific guidance as to how
Treasury evaluates the information contained in a company’s financial statements and other
submitted information.
The amount of paid-up capital and surplus of a company shall be determined on an insurance
accounting basis from the company’s financial statements and such other information as Treasury
may require, as stated in 31 CFR 223.15. Please be advised that there are areas of Treasury’s review
that may continue to be more conservative than codification. Treasury’s financial analysis will
determine if a downward adjustment to a company’s policyholders’ surplus will be made, or if the
financial picture of the company causes Treasury concern over the ultimate solvency of the company.
A company will be informed when adjustments are made to its policyholders’ surplus. This will occur
when Treasury considers its financial picture to be hazardous, or when Treasury believes the
company is not in compliance with its requirements.
Non-compliance with statutory, regulatory, or other requirements in this letter may result in a
company’s Certificate not being renewed or its Certificate being revoked.
As stated in 31 CFR 223.2, Treasury may at times require additional information or exhibits to perform
its review.
I.

Assets – General Criteria for Admissibility:
For Treasury rating purposes, admissible assets generally are limited to investments in cash items,
marketable securities, mortgage loans (within certain limits), and realty necessary for the conduct of
the company’s business. Normal account balances such as agents’ balances are only admissible if
collectible within 90 days. Other assets may be admissible if they meet criteria described in this letter.
As stated in 31 CFR 223.9, Treasury periodically issues instructions (via Annual Letters) with respect
to investments and other matters. Each investment (other than U.S. Government securities and
securities of affiliates or subsidiaries which are valued in accordance with Instruction III) is limited to
10 percent of total admitted assets, net of the item under consideration. Numerous deposits with one
financial institution are also limited, in total, to 10 percent of the total admitted assets, net of the item
under consideration. For miscellaneous assets shown in the Annual Statement, only those items that
are adequately supported as to both value and convertibility within 90 days will be admissible for
Treasury rating purposes. Goodwill and other intangibles are not admissible assets for Treasury
rating purposes.
Please be advised that specific assets, which are admissible under codification and/or certain state
permitted practices, may require additional supporting documentation in order to be admissible under
Treasury criteria.

II.

Securities:
In the Annual Financial Statement required by 31 CFR 223.9, securities owned by reporting
companies should be valued and reported using the following criteria:
(a) Bonds, unaffiliated common stocks, and preferred stocks shall be valued and reported in
accordance with the NAIC’s Accounting Practices and Procedures Manual and in accordance
with the NAIC Valuations of Securities Manual, as prepared by the Securities Valuation Office
(SVO).
(b) The value of all other securities should be based on market quotations as of December 31.

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To be admissible, a security must be readily marketable (may be liquidated within 90 days), as
evidenced by it being actively traded on an active, reliable, and continuous market (such as would
be achieved by trading on a national exchange or two or more regional exchanges).
Securities not rated as high quality by the NAIC (NAIC designations 3-6), may be non-admissible for
Treasury rating purposes. Securities purchased in a prior year which have been designated “Z” may
also be non-admissible for Treasury rating purposes..
Securities of controlled or affiliated companies must be valued in accordance with Instruction III below.
Investments in foreign stocks and foreign bonds may be admissible as long as they do not exceed a
combined value of 10% of the reporting company’s total admitted assets. Foreign investments must
be reported in U.S. dollars as of the date of the financial statement.
Investments may be considered admissible provided:
• The company provides a detailed, written analysis of their portfolio of
investments to include the following:
• Company investment philosophy for all asset types;
• Process company follows should investment philosophy shift for any/all
asset types;
• Process company follows if/when the asset is liquidated prior to maturity; and,
• Historical analysis depicting investment intent (i.e. – is it typically held to
maturity, how often are assets liquidated prior to reaching maturity, etc.)
Investments reported as “other invested assets” are normally non-admissible for Treasury rating
purposes as their valuation and marketability have not been adequately supported. However,
Treasury will consider the admissibility of these investments on a case-by-case basis provided the
company can provide the written analysis required above with regards to their “other invested
assets.”
III.

Securities of Controlled Companies:
Investments in subsidiaries, controlled and affiliated entities should be reported in accordance with
the NAIC’s Accounting Practices and Procedures Manual. However, Treasury may make
adjustments to the valuations reported based on the criteria set forth by Treasury in this document.
Reporting companies owning securities that are greater than 20% of their PHS, of other insurance
companies, which are under the same direction and control as the reporting company, should furnish
copies of their NAIC File Upload (s.txt file only) of such other companies. The NAIC File Upload (s.txt file
only) must be in accordance with the NAIC Annual Statement Filing Specifications. Each annual and
quarterly statement must be signed and sworn to by the company’s President and Secretary or if
being signed by someone other than the President and Secretary, must be signed and sworn in
accordance with the state requirements and provide the state provision in support. The form must be
notarized (wet or electronic signatures and notary seals are acceptable).
The assets of the insurance subsidiary companies will also be analyzed according to the criteria set
forth by Treasury in this document. Should an analysis of the financial statement of the subsidiary
lead to a downward adjustment of any assets of the subsidiary, it will result in an equivalent deduction
from the Treasury listed parent company's surplus for Treasury rating purposes.
The common stock of insurance subsidiaries certified by Treasury, if held by other Treasury certified
companies, will be considered a non-admissible asset when determining the parent company's
Treasury underwriting limitation. This valuation method is effective for transactions dated after
December 31, 1988 and will be applied to new subsidiary relationships created by a reorganization
or by changes in the organizational structure of the group due to new acquisitions or combinations.
Reporting companies owning securities of non-insurance subsidiaries, which are under the same
direction and control as the reporting companies, should also furnish copies of the financial
statements of such companies as of the reporting date. The financial statements of non-insurance
companies should be independently audited.

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Treasury normally deems debt instruments of affiliated companies non-admissible because such
instruments generally constitute a direct or indirect loan to a substantial stockholder (see Instruction
V).
IV.

Real Estate and Mortgages - Appraisals Required:
Values shown for these items in the Annual Financial Statement will be considered in accordance with
the following criteria:
(a) Real Estate - only realty essential to the operating needs of the company for conducting its
business is admissible for Treasury rating purposes, i.e., realty that is reported as property or
properties occupied by the company on the company’s Annual Statement. However, the total of all
realty that is reported as occupied by the company on the company’s annual financial statement will
be admissible only to the extent that the aggregate value does not exceed 20% of policyholders’
surplus, as of the date of the financial statement, i.e., the realty that meets this standard is admissible
to the extent of reported value, or 20% of policyholder surplus, whichever is less. Real Estate should
be valued in accordance with the NAIC’s Practices and Procedures Manual (generally at cost less
depreciation and net of encumbrances).
The value of each parcel of real estate must be supported by an acceptable appraisal as defined in item
(c) of this Instruction. In the case of a home office being constructed, an acceptable appraisal will be
required upon completion of the construction.
Real Estate held solely as an investment is non-admissible for Treasury rating purposes (i.e., real
estate that is reported as property or properties held for the production of income on the company's
Annual Statement). In addition, real estate that is reported as being held or listed for sale is
considered non- admissible; however, if the real estate reported as being held or listed for sale was
reported in the prior reporting period as a property occupied by the company for conducting its
business and was considered admissible by Treasury in the prior year, that property will be
considered admissible for a period of one year to allow for its disposition.
Improved or unimproved salvage realty is normally admissible (if supported by a competent appraisal)
for a period of two years to permit its disposition. Land contracts are normally non-admissible.
(b) Mortgages - conventional first mortgage loans on unencumbered, improved, or productive real
estate located within the United States are admissible. Mortgage loans meeting these criteria should
be valued and reported in accordance with the NAIC’s Practices and Procedures Manual. Mortgage
loans considered to be impaired as defined by the NAIC’s Practices and Procedures Manual may be
deemed non-admissible for Treasury rating purposes. The mortgaged property should be supported
by a competent appraisal, as defined in item (c) of this Instruction and should be protected by
adequate fire insurance. For this purpose, "improved" property means land on which there has been
substantial building. Mortgage loans on undeveloped land, construction loans, and loans on properties
not being used for purposes for which they were valued are not admissible for Treasury rating
purposes. Chattel mortgages and related instruments, whether carried as mortgages, secured notes,
or collateral loans, are also normally non-admissible for Treasury rating purposes.
(c) Appraisals - An appraisal report which includes the information and computations normally used
in arriving at a competent appraisal value based upon: (1) the property's cost; (2) market value;
and/or (3) income-producing capability, as applicable, must be furnished to support the value of each
mortgage investment made and each new parcel of real estate acquired during the calendar year. If
an appraisal is furnished covering land purchased on which the company later constructs a company
office building, it is not necessary to submit a subsequent appraisal covering construction costs of
the building. Appraisals covering direct mortgage loans or participation certificates in mortgages fully
insured by the FHA, VA or other instrumentality of the United States need not be furnished. In such
cases, Schedule B of the Annual Financial Statement should specify which Federal agency is insuring
the loan.

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V.

Miscellaneous Assets:
Complete information must be furnished relative to any salvage or miscellaneous assets included in
the balance sheet, and the value of such items must be satisfactorily supported, otherwise, such items
will not be allowed as admitted assets for rating purposes. Salvage, if satisfactorily supported, is
normally admissible for a period of two years to permit its disposition. Direct or indirect loans to
officers, directors, substantial stockholders (corporate or individual), or members of their families,
whether secured or not, will not be considered as admitted assets for rating purposes. Loans secured
by the company's own stock are also non-admissible.

VI.

Minimum Bail Reserve Requirements:
Companies transacting surety bail business should establish a minimum reserve (utilizing company
funds) for unearned premiums sufficient to reinsure such business in the event of insolvency. This
reserve should equal the lesser of 35 percent of bail premiums in force or $7 per $1,000 of bail liability.
Bail premiums in force are those relating to the December 31 outstanding bail liability whether or not
the premiums are recorded as earned when the bond is written but are not intended to include bail
agents' fees. A schedule showing bail premiums in force and bail liability and the associated unearned
premium reserve should be submitted with the Annual Statement NAIC Upload File (s.txt file only).

VII.

Reinsurance:
Treasury Schedule F (Treasury Form No. FS 6314) lists the companies, pools and associations,
which are recognized by the Treasury. It is requested that the information reflected in Schedule F
Part 3 of the company's annual statement be reported on the Treasury form in accordance with
instructions on the schedule.
The Treasury Schedule F is a spreadsheet that is formula driven and automatically transfers data to
the appropriate summary pages. Companies must simply enter their data, and data transfer between
sections will occur automatically. In accordance with the regulation update, Section II instructions
were modified to include Treasury authorized Alien Reinsurers and Complementary Reinsurers.
Section II subpart A now includes a pre-populated listing of companies meeting these criteria currently
approved by Treasury. All companies are reminded that the summary page of Schedule F must be
included and be accurately completed. Companies are required to submit the Treasury Schedule F
as a MS Excel document. If errors are found in the document, the applicable financial analyst will request
to have it accurately completed.
The Treasury Schedule F can be downloaded from our website at the following
address: https://www.fiscal.treasury.gov/surety-bonds/downloads.html
Please note that this form is updated annually to accurately reflect any company changes to our
program, and the current version must be downloaded from our website each year prior to filling in
the data. For those companies using their internal computer systems to fill in the data, we post a
PDF document in addition to the Treasury Schedule F that details all the changes since the last file
was published to assist when updating each internal system.
Furthermore, please reference the instructions page when inputting data. A Treasury authorized
company may differ from an authorized company on the statutory financials and only includes
companies within our program
Regarding completion of the file, credit may be taken for reinsurance ceded to a US domiciled, nonTreasury authorized/recognized parents, subsidiaries and/or affiliates (Section II of Treasury
Schedule F), if the parent, subsidiary and/or affiliate is financially solvent as evidenced by the
submission of independently audited financial statements.

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Companies may receive credit for unauthorized reinsurance to the extent of funds held or letters of
credit or trust agreements from unauthorized companies, provided that the Treasury is advised of
the amount of funds held, letters of credit posted or funds secured in trust for each company.
Reinsurance payables, i.e., ceded (premium) balances payable as would be reported for the
cessions on statutory statement Schedule F, Part 3, Column 17, are allowed as offsets for Treasury
rating purposes provided there is a legal right of offset.
Credit may also be taken, with prior approval from Treasury, for trust account assets associated with
multi- beneficiary trust agreements established and maintained in the United States by overseas
accredited or trusteed reinsurers, to the extent the unauthorized ceded business is covered by these
trust account assets.
Please note that companies recognized by the NAIC as overseas accredited trusteed reinsurers may
be considered unauthorized by Treasury. Business ceded to these reinsurers which is not covered
by the aforementioned trust account assets, and not otherwise offset by other funds held, may
continue to be included in any applicable Schedule F penalty. In addition, please be advised that
these trust account assets cannot be used to protect excess risks reported on Fiscal Service form
285A, Treasury’s Schedule of Excess Risks.
Credit for funds held may be accomplished by including necessary information relative to the
unauthorized reinsurance in Treasury Schedule F, Part 2. When reserves are not provided for
reinsurance ceded to unauthorized companies, the company's surplus will be adjusted for Treasury
rating purposes to provide such reserves.
Letters of credit issued to surety companies and reported in Schedule F, Part 3 of a company's
financial statement, may be recognized as an offset to reinsurance recoverables and unearned
premiums for reinsurance ceded to companies not recognized by the Treasury for reinsurance
purposes. Such letters of credit should be in U.S. currency and be valid for a period of not less than
one year, with an option to renew thereafter, and must be clean, irrevocable, unconditional letters of
credit, (See page 14), issued by any of the banks on NAIC’s current list of “Banks Meeting Credit
Standards for Issuing Letters of Credit.” If such LOCs are issued by more than one bank, the LOC
should specify how the funds are to be drawn on. Copies must be provided of Letters of Credit, Trust
Agreements and Trust Account balances as of year-end in support of the 3 largest credit amounts
(column 3) reported on the Treasury Schedule F, Part 2, which are driven by such mechanisms in
Cols. 2B and 2C.
Treasury considers reinsurance recoverables on paid losses that are over 90 days past due to be
non- admissible assets. If such recoverables are material in nature, the reduction of loss reserves
for the associated unpaid recoverables and Incurred But Not Reported (IBNR) will be disallowed.
Treasury should be provided with detailed information concerning collection practices, corrective
measures being taken, and/or other relevant information.
Treasury should also be provided an explanation for material amounts classified as "in dispute."
The IBNR reported on Treasury Schedule F should agree with the IBNR reported on page 10 of the
financial statement.
VIII.

Excess Risks and Quarterly Reporting:
No company authorized to do business with the United States may expose itself on a single risk in
an amount exceeding 10 percent of its combined capital and surplus, as determined by the Treasury,
unless the excess liability is protected by one of the several means authorized in 31 C.F.R. §223.11.
For purposes of this part, “single risk” is defined as the total risk under one bond or policy regardless
of the number of individual risks under that bond or policy. As required by 31 C.F.R. 223.8, each
company must report quarterly to the Treasury every risk that it has underwritten, either directly or
through assumed reinsurance, during the preceding three months (rather than year-to-date), in
excess of its Treasury underwriting limitation. These requirements are not limited to surety risks but
apply to bonds or policies in all lines of business (e.g., fire, marine, commercial liability), whether or
not the United States is a party to the risk.

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In accordance with the regulation update, Treasury underwriting limitations are published on our
website on August 1 and are based on the most recent year-end financials. Treasury underwriting
limitations are applicable, unless revoked or modified prior, beginning August 1 through July 31 of
the following year. Treasury has provided guidance on which underwriting limitations to utilize in the
preparation of this form within the specific instructions of the form and also within the regulation
implementation guide published on our website.
Quarterly reports of such excess risks must be made on Treasury Form FS 285-A, Schedule of
Excess Risks as an MS Excel document. If there are no excess risks to report, “None” should be
entered on the form or a letter provided along with the required signatures and notarization.
An important distinction to make in completing the Schedule of Excess Risk is that Treasury
authorized reinsurance may differ from statutory-reported authorized reinsurance. More specifically,
Treasury authorized insurance relates to those companies approved within our program.
Additionally, please note that amounts reported on the form as Treasury authorized cannot exceed
each listed Treasury certified surety company’s or reinsurer’s Treasury underwriting limitation. In the
event that they do, the remainder in excess of the Treasury underwriting limitation would need to be
reported as unauthorized. Again, all Treasury underwriting limitations for certified companies and
reinsurers can be found on our website. Regarding amounts reported for Treasury authorized
reinsurers within our program, Treasury authorized reinsurance must not exceed 10% of their most
recent year-end policyholder surplus value (not applicable to Lloyds Syndicates, Complementary
Reinsurers, Alien Reinsurers, and Pools & Associations).
As required by 31.C.F.R. § 223.11, excess risks running to the United States must be reinsured within
45 days from the date of execution and delivery of the bond and reinsurance agreement forms should
be executed and filed in accordance with the instructions given on the form. Use Standard Form 273
for Miller Act Performance Bonds, Standard Form 274 for Miller Act Payment Bonds and Standard
Form 275 for all other Federal bonds. Should any standard form be signed by an attorney-in-fact
instead of an officer of the company, a power of attorney issued by the company authorizing the
attorney-in-fact should be attached to the Schedule of Excess Risks with the relevant form. Use
Standard Form 24 for Miller Act bid bonds, Standard Form 25 for Miller Act performance bonds, and
Standard Form 25A for Miller Act payment bonds.
In the event that a company utilizes coinsurance as a protective method for limitation of an excess
risk, the amount coinsured by the company must be within its underwriting limitation, as required by
31.C.F.R. § 223.11 (a). A company cannot use reinsurance to exceed its underwriting limit on a
coinsured risk.
Please be advised that letters of credit are generally not considered an acceptable method of
protecting excess risks. However, Treasury will consider a letter of credit as adequate protection of
an excess risk if it meets the requirements of 31 C.F.R. § 223.11 (c) (1). In addition, assets held in
trust that are reported as an offset to the unauthorized reinsurance penalty on the company’s Treasury
Schedule F cannot be used to protect excess risks reported on the company’s Schedule of Excess
Risks. Separate trusteed assets that meet Treasury’s admissibility requirements may be used for
this purpose.
The Schedule of Excess Risks must be signed and sworn to by the company's President and
Secretary or can be signed by another appointee of the company, however a corporate resolution or
sufficient documentation must be provided. The form must be signed and sealed by a notary.
Electronic Signatures are acceptable in accordance with the Surety Bond’s electronic signature
guidance.
IX.

Capital Changes:
Where there have been changes in paid-up capital and/or contributions to surplus, approvals by the
insurance supervisory authorities of the company's state of incorporation certifying to the verification
of such transactions, if available, should be forwarded.
Additionally, a company may request that their Treasury underwriting limitation be reviewed and
potentially revised after August 1 if such major changes have occurred, impacting the policyholder’s

9

surplus value. These changes would need to be reflected on a financial statement before any
changes can be made.
X.

Changes in Stock Ownership:
The Treasury requires each stock surety company to furnish a list of stockholders in support of its
application. It is required that each such company submit a statement signed and sworn to by the
Secretary or Assistant Secretary and by the Treasurer or Assistant Treasurer of the reporting
company, each time any person becomes owner of more than 5 percent of any class of outstanding
stock issued by the company. Within 10 days after such change in ownership, any such changes that
have occurred subsequent to the submission of the original list and that have not been reported to
date should be forwarded with the Annual Financial Statement. Also, whenever the record of
ownership of a stockholder increases or decreases by 5 percent or more of any class of outstanding
capital stock issued by the company, either in one transaction or in a series of transactions from time
to time, the company should file such changes within 10 days from the date the aggregate change is
five (5) percent or more.
To ensure that the company's certification continues without interruption, it is recommended that
change in ownership details be provided to Treasury prior to affecting the change.
For purposes of these Instructions, "person" is not limited to natural persons but also includes
corporations, partnerships, pension funds, profit sharing funds, and any organization of whatever
nature.

XI.

Mergers, Transfers, Assumptions, and Group/Pool Restructuring:
The Treasury should be promptly advised regarding proposed or effected mergers, consolidations,
transfers, assumptions, (material) group/pool restructuring, name changes, etc., in which the
reporting company is involved. Copies of agreements or documents pertaining thereto, as approved
by the insurance department of the company's domiciliary state, should be furnished so that the
Treasury may take timely action and advise Federal bond-approving officers accordingly, where
necessary.
In the event of such change(s) and upon the effective date, Treasury will work with the respective
company to request updated financials reflecting the change(s). A review of the financials may lead
to a revision of the company’s Treasury underwriting limitation.

XII.

Charter & Bylaws Amendments:
In the event that the charter or bylaws of a company have been amended during the period, a
certified copy of such amendment or amended charter or amended bylaws should be submitted,
unless these papers have been previously filed with the Treasury.

XIII.

Actuarial Opinion and Explanatory Memoranda - Loss Reserves:
A statement of actuarial opinion on the adequacy of all loss reserves of the company must be
provided by a “qualified actuary” as defined by the NAIC. The scope, format and opinion of the report
should also conform to the requirements of the NAIC Annual Statement Instructions for Property
and Casualty Companies.
In the event that a company has taken significant action in any area of operation which would not be
evident from a review of the company's financial statements, such action should be explained fully
in a supporting memorandum. For example, if during the year the company has increased loss
reserves to compensate for inadequate prior years' reserves, the circumstances and amount
involved should be explained (including specific advice as to the extent the incurred losses shown in
Schedule P were adjusted, on the basis of a review of unpaid losses as contrasted with the payment
of losses). Where a pooling arrangement exists, an actuarial opinion on the reserve adequacy of the
pool should be provided, along with a worksheet showing the percentage participation and reserves
allocated to each of the individual pool members.

10

Should the Treasury's review reveal that reserves for losses incurred in prior years were substantially
inadequate in light of subsequent developments, Treasury will require the company to furnish
satisfactory documentation related to the reserves from a CPA firm, independent actuary or state
insurance department, indicating its reserves are adequate at December 31. Accordingly, companies
filing annual statements which show material adverse reserve development may wish to make plans
to obtain such confirmation. If adverse development continues to appear, such confirmation may not
be accepted from the same person (CPA firm, actuary, etc.) two consecutive years. However, if the
development of the reserves is not adverse, an actuarial opinion provided by a “qualified actuary”
employed by the company will suffice.
Other actions, which might require explanatory memoranda, would be the discontinuance of
unprofitable lines, special reinsurance arrangements, and items of a similar nature.
XIV. State License Data:
Each company holding a Certificate of Authority must furnish updated surety license information each
year. Surety license information will be published in the forthcoming August 1 revision of Treasury
Circular 570.
The license sheet is available online and can be downloaded from our website at
https://www.fiscal.treasury.gov/surety-bonds/downloads.html. A completed copy must be submitted
with the 4th quarter submission. If a company has expanded into new states since the prior year’s
submission, a State issued Certificate of Authority for each new state is required along with the form.
XV. State Examination Reports:
If a company has been examined during the year by a state insurance department, a copy of the
examination report, if available, must be forwarded with the Annual Financial Statement (provided that
the Treasury has not already been furnished a copy). Copies of such reports should normally be
furnished to the Treasury within 10 days after receipt by each reporting company. If
recommendations or areas of concern are noted in the examination report by the examiners, the
company should provide Treasury a copy of the company’s response to the examiners which outlines
the corrective actions that the company is taking with respect to the recommendations or areas of
concern.
XVI.

Contingent liabilities:
Contingent liabilities may create an adjustment to policyholders' surplus for Treasury rating purposes.

XVII.

Claims - Prompt Payments:
The Treasury expects companies to honor valid Federal claims promptly. In addition, 31 U.S.C. §
9305 provides that a final judgment on a Federal claim (from which no appeal or supersedeas has
been taken) must be satisfied within 30 days. Failure to do so may result in revocation or non-renewal
of a company's Certificate of Authority.

XVIII. Risk-Based Capital (RBC):
Risk-Based Capital (RBC) is a method of measuring the minimum amount of capital appropriate for
a reporting entity to support its overall business operations in consideration of its size and risk profile.
RBC limits the amount of risk a company can take and requires a company with a higher amount of
risk to hold a higher amount of capital. Capital provides a cushion to a company against insolvency.
RBC is intended to be a minimum capital standard and not necessarily the full amount of capital that
an insurer would want to hold to meet its safety and competitive objectives.
The RBC formula was developed as an additional tool to assist in the financial analysis of insurance
companies. The purpose of the formula is to establish a minimum capital requirement based on the
types of risks to which a company is exposed. Separate RBC models have been developed for each
of the primary insurance types: Life, Property/Casualty, Health and Fraternal. This reflects the
differences in the economic environments facing these companies. The risk factors for the NAIC’s
RBC formulas focus on three major areas: 1) Asset Risk, 2) Underwriting Risk, and 3) Other Risk.

11

RBC is not designed to be used as a stand-alone tool in determining the financial solvency of an
insurance company. As such, Treasury uses as part of its valuation of a company’s assets and
liabilities pursuant to 31 CFR 223.9. Treasury uses RBC in conjunction with a company’s overall
financial results, ratios, and trends to evaluate its financial strength and solvency. The RBC ratio
should be maintained at 200% or more at all times. If a company’s RBC ratio falls below this threshold
or otherwise exhibits a concerning trend, Treasury may require the company to take corrective action
to maintain its certification.
XIX. Financial Results and Trends:
If a company’s Annual or Quarterly Financial Statements required by 31 CFR 223.8 show a
deterioration in financial results as evidenced by decreasing policyholders’ surplus, large
underwriting or net losses, unsatisfactory ratio results, negative cash flows, etc., Treasury may notify
the company of its concern and request additional information. A company that fails to respond
satisfactorily to such an inquiry may have its application for renewal of its Certificate of Authority
denied or have its Certificate revoked by Treasury.
XX. Ratio Results:
Companies recognized by Treasury are expected to maintain results within the usual ranges for the
IRIS ratios. When a company’s ratios results do not fall within the usual ranges, management’s
explanation for unusual results must be submitted by May 1st. In those instances where a company
ceded a substantial portion of its premiums to an affiliated company, the ratios for the consolidated
statements of the company and its affiliates shall also be emailed. To continue as an acceptable
surety of Federal bonds, a company will be expected to maintain usual results for the following ratios:
UNUSUAL VALUES EQUAL TO OR RATIO
1. Gross Premiums Written to Policyholders’ Surplus
2. Net Premiums Written to Policyholders’ Surplus
3. Change in Net Writings
4. Surplus Aid to Policyholders’ Surplus
5. Two-Year Overall Operating Ratio
6. Investment Yield
7. Gross Change in Policyholders’ Surplus
8. Net Change in Adjusted Policyholders’ Surplus
9. Liabilities to Liquid Assets
10. Gross Agents’ Balances to Policyholders’ Surplus
11. One-Year Reserve Development to Policyholders’ Surplus
12. Two-Year Reserve Development to Policyholders’ Surplus
13. Estimated Current Reserve Deficiency to Policyholders’ Surplus

OVER
900
300
33
15
100
5.5
50
25
100
40
20
20
25

UNDER
---33
--2.0
-10
-10
-----

When a company's ratio results do not fall within the usual ranges, Treasury may notify the company
of its concern over the company's financial condition. The company will be afforded an opportunity
to respond to Treasury's concern. The risk-based capital (RBC) ratio should be maintained at 200%
or more at all times.
If information submitted by the company is insufficient to satisfy the Treasury of the company's
compliance or its continued ability to keep and perform its contracts, Treasury may commence
proceedings to revoke the company's Certificate of Authority. (See 31 CFR 223.19.)

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Paperwork Reduction Act Statement
By authority of 31 U.S.C. 9304-9308, 31 CFR, Part 223, the information requested in this letter is required to retain a benefit and to enable the
Assistant Commissioner, Fiscal Accounting, Bureau of the Fiscal Service, Department of the Treasury, to determine if your company is maintaining
compliance with the requirements of the Department of the Treasury in order for your company to remain qualified and acceptable as a surety or
reinsurer of Federal bonds. Certified companies are required to file this information with Treasury once each year on March 1. Failure to provide
this information will result in non-compliance with Treasury regulations and may result in a loss of your company's authority to act as a surety or
reinsurer of Federal bonds.
Burden Estimate Statement
The estimated average burden associated with this collection is 39.75 hours per respondent or record keeper, depending on individual
circumstances. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the
Bureau of the Fiscal Service, Forms Management Officer, Parkersburg, WV 26106-1328. THIS ADDRESS SHOULD ONLY BE USED FOR
COMMENTS AND/OR SUGGESTIONS CONCERNING THE AMOUNT OF TIME SPENT TO COLLECT THIS DATA. DO NOT SEND THE
COMPLETED PAPERWORK TO THE ADDRESS ABOVE FOR PROCESSING.

13

NOTE: FORMAT OF LETTER OF CREDIT TO BE USED BY SURETY COMPANIES DOING
BUSINESS WITH THE DEPARTMENT OF THE TREASURY, IF APPLICABLE.
In order to be admissible for financial statement purposes, any letter of credit shall be in the format given
below.
(References: 31 CFR 223.9 and 223.11 (c) (1); Treasury's Current Annual Letter to Executive Officers of
Surety Companies Reporting to the Treasury, Instruction VII and VIII)
LETTERHEAD OF BANK
(Bank Must be Listed on NAIC’s “Banks Meeting Credit Standards for Issuing Letters of Credit”)

NAME OF BENEFICIARY:
REF: IRREVOCABLE CLEAN LETTER OF CREDIT NO.
Sir / Madam:
At the request of

we have established our clean, Irrevocable Credit No.

in your favor as

stated below:
AMOUNT:
EXPIRING ON:
If we receive here at our office, on or before the expiry hereof, your sight draft on us, mentioning our
reference number, for all or part of this credit, we will promptly honor the draft. It is a condition of this
Letter of Credit that it will be automatically extended for periods of one year from the then relevant
expiry date unless thirty (30) days prior to that relevant expiry date the issuer, by written notice to the
beneficiary, elects not to extend this Letter of Credit. Except as stated herein, this undertaking is not
subject to any conditions or qualifications whatsoever. Should you have any occasion to communicate
with us regarding this credit, kindly direct your communications to the attention of
.
Sincerely,

TELEPHONE:
EMAIL ADDRESS:

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