What it is
The three Cs of surety underwriting are a simple framework for how a surety looks at a contractor. Character asks about reputation, integrity and track record. Capacity asks whether the contractor has the experience, people and equipment to complete the work. Capital asks about financial strength and resources.
Underwriting is the process a surety uses to decide whether to stand behind a contractor with a bond. Because a surety is, in effect, extending its credit and backing to the contractor, it wants to understand the risk before it agrees to do so. The three Cs give that review a common structure.
Some people add other topics to the list, such as conditions, collateral or the specific project. The three Cs are best seen as a starting point, not a complete checklist. What a surety considers can vary by company, project and situation.
How it’s traditionally been approached
Traditionally, character has been assessed through things like business history, references, relationships with suppliers and owners, and how past jobs were finished. Sureties often want to see that a contractor pays its bills and meets its commitments.
Capacity has typically been reviewed through resumes, past project types and sizes, work in progress, staffing and management depth. Capital has typically been reviewed through financial statements, working capital, net worth, credit and banking relationships. The level of detail requested often differs by surety and by the size of the bond.
Contractors have commonly worked with an independent surety agent or broker to organize this information. Some prepare financial statements with an accountant and keep a clear record of completed work. Specific requirements vary, so they should be confirmed with a licensed surety agent.
How the right surety agent may help
The right surety agent may help you understand how each of the three Cs applies to your own business. A good agent can explain which strengths you can highlight and which areas a surety may want to see more detail on. This is a possibility, not a promise of any result.
A first conversation is generally a chance to describe your company, your work history and the kinds of projects you hope to pursue. The agent may ask for financial statements, a resume of experience, and information about current jobs. For new and growing contractors, the agent may also talk about how a business can build a track record over time.
Helpful questions to ask include: Which of the three Cs is most important for my type of work? What documents should I gather first? How might growth affect what a surety wants to see? Which sureties does your agency work with? What do the project owner or contracting agency require for a performance bond? Bonding approval and capacity are never guaranteed.
The bigger picture
Bonding can feel personal, because underwriters look closely at both your business and your finances. It is normal to feel some pressure, especially when a bid deadline or a growth opportunity is on the line. Seeing the three Cs as a way to understand your business, rather than a judgment of you, may help reduce stress.
Steady habits, such as organized books, honest communication and realistic planning, can support both your business and your peace of mind. If financial stress affects your wellbeing, talking with trusted advisors and support resources, including Providers.plus where relevant, may help. Every contractor's path is different, and no approach is wrong.
Keep in mind
- This page is general education about construction bonds, not legal, financial or insurance advice.
- Bonding requirements, amounts and procedures vary by state, agency and project, so confirm them with a licensed surety agent or broker and the project owner, licensing board or contracting agency.
- No agent or surety can guarantee bond approval, a specific bond capacity or a contract award.
- Constructionperformancebond.com is an independent directory, not a professional advisor, and it is part of the R0cketShip network.
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Frequently asked questions
What are the three Cs of surety underwriting?
The three Cs of surety underwriting are character, capacity and capital. Character covers reputation and track record, capacity covers the ability to perform the work, and capital covers financial strength. Sureties have traditionally used them to evaluate a contractor for a construction bond.
Why do sureties use the three Cs?
Sureties use the three Cs to understand the risk of backing a contractor with a bond. The framework gives them a consistent way to review a contractor's integrity, ability and finances. Each surety may weigh these areas differently.
How does a new contractor show character, capacity and capital?
A new contractor may show character through references and a record of honest dealings, capacity through relevant experience and key personnel, and capital through financial statements and available resources. A surety agent may help organize this information. Results are never guaranteed.
Is capital the most important of the three Cs?
Not necessarily. Capital is important, but sureties generally look at all three areas together, and their emphasis can vary by company and project. A contractor with limited capital may still have strengths in character and capacity that a surety considers.
Are there more than three Cs in surety underwriting?
Yes, some people add other factors such as conditions, collateral or the specific project. The three Cs are a common starting framework rather than a full list. A licensed surety agent can explain what a particular surety may consider.
How can a surety agent help me with the three Cs?
A surety agent may help you understand what a surety looks for, gather documents and present your business clearly. They can also explain requirements for a performance bond on a specific project. They cannot guarantee approval or a particular bond capacity.
Educational resource. Construction Performance Bond shares general information and connects people with independent surety agents. It is not professional advice. Talk with a qualified professional about your own situation.