U.S. Treasury Modernizes Surety Bond Rules (Effective August 2024)

What changes did the U.S. Treasury make to surety bond regulations in 2024?

U.S. Treasury Modernizes Federal Surety Bond Regulations

The U.S. Department of the Treasury updated 31 CFR Part 223 with significant modernizations to federal surety bond rules, effective August 9, 2024.

Key Changes

1. New Reinsurer Categories The Treasury now recognizes additional types of reinsurers for federal bonds:

• Reciprocal jurisdiction reinsurers: Reinsurers from jurisdictions with equivalent regulatory standards
• Alien reinsurers: Foreign reinsurers meeting specific criteria
• This expands the pool of acceptable reinsurance for companies writing federal bonds

2. Letters of Credit for Excess Risk

• Surety companies can now use letters of credit to secure excess risk positions
• Previously, only certain collateral types were accepted
• This provides more flexibility for sureties managing large federal bond portfolios

3. Circular 570 Publication Schedule

• Treasury Circular 570 (the list of approved surety companies) will now be published August 1 annually
• Previously published on an irregular schedule
• Provides consistency and predictability for federal procurement

What is Treasury Circular 570?

Treasury Circular 570 is the official list of surety companies approved to write bonds for federal obligations. Companies must meet strict financial requirements and undergo regular review to remain on the list.

Impact on Federal Bonds

These changes affect all bonds required for federal projects and obligations, including:

• Federal construction performance and payment bonds
• Federal license and permit bonds
• Federal court bonds
• Immigration bonds
• Other bonds required by federal agencies

Why This Matters

The modernization:

• Aligns federal regulations with current reinsurance practices
• Provides more flexibility for surety companies
• Improves consistency in federal procurement
• Supports the capacity of sureties to write larger federal bonds

Contractors and businesses working with federal agencies should verify their surety company remains in good standing on the August 2024 (and subsequent annual) Circular 570 publications.