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					  The Surety Association of America
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                                        MEMORANDUM
TO:             Local Surety Associations

FROM:           Dov Weinstein

DATE:           August 2, 2005

SUBJECT:        Regulation Report for July 2005
______________________________________________________________
New bonding opportunities are marked with a triple asterisk. Highlights of proposed and
final regulations for July include:

Federal

***Renewable Energy Systems (7 CFR 4280)                                                 FINAL
These final rules (7/18/05) require performance and payment bonds for equipment purchases
relating to renewable energy systems and energy efficiency improvement projects in excess of
$200,000. Federal surety regulations for contracts over $100,000 must be met. “If the contractor
will receive a lump sum payment at the end of work, the Agency will not require surety.”

***Longshore and Harbor Workers' Compensation Act (20 CFR 701, 703)                         FINAL
This final regulation (7/26/05) requires “each insurance carrier authorized by OWCP [Office of
Workers' Compensation Programs] to write insurance under the LHWCA [Longshore and
Harbor Workers' Compensation Act] or any of its extensions, and each insurance carrier seeking
initial authorization to write such insurance, [to] apply annually, on a schedule set by OWCP, for
a determination of the extent of its unsecured obligations and the security deposit required.” A
surety bond can be used to meet these obligations. The regulation also requires employers who
wish to self-insure to post a surety bond or other security to secure their obligations.

SEC Electronic Filings (17 CFR Parts 232, 239, 249 et al.)                               FINAL
These final SEC regulations (7/27/2005) require investment companies to file their Section 17
fidelity bonds (Rule 17g-1(g)(1)) electronically.




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California

***Commercial Fundraiser for Charitable Purpose                                            FINAL
(Title 11, Division 1. Chapter 4 §308)
This final regulation (6/24/05) requires a “commercial fundraiser for charitable purpose” to post
a $25,000 surety bond before soliciting donations in California.

DMV Private Industry Partners (Title 13, Division 1, Ch. 1 Art. 3.6.)                  PROPOSED
This proposed rule would modify the financial security requirements for private industry partners
of the Department of Motor Vehicles (DMV)) that electronically process and update registration
and titling transactions. Currently, surety bonds or letters of credit are acceptable. This rule
would only allow surety bonds or cash deposits. Furthermore, the rule would reduce the bond
required from a second-line business partner, which only processes registration renewal
transactions, from $16,000 to $10,000. Bond amounts for other types of partners would remain
the same. The regulation also contains a new bond form. The SAA submitted comments
regarding this new bond form, recommending that the bond form should be conditioned on the
expected.” Surety and fidelity bonds were already a way to obtain financial assurance and this
Rule does not change that.

Florida

Rating Rules (69O-170)                                                                 PROPOSED
These proposed rules would allow companies that use the loss costs and rules of a rating
organization to only file the loss cost multiplier to be used with those loss costs. Currently, such
companies must file “the rates, rules, [and] deviations or effective dates, which are the
exceptions to those filed on behalf of the company by the rating organization.” As this
regulation is positive for SAA members, SAA decided not to submit comments.

***Rental Recovery Loan Program (67ER05-8)                                        EMERGENCY
These emergency regulations “establish the procedures by which the [Housing Finance]
Corporation shall administer the Application process, determine loan amounts, make and service
mortgage loans for the construction or Substantial Rehabilitation of affordable rental units
utilizing Rental Recovery Loan Program funds, authorized by Ch. 2005-92, L.O.F.” The general
contractor of a project would have to provide an audited financial statement to the credit
underwriter. Alternately, the general contractor could post 100% performance and payment
bonds from an “A-” or better rated company. The credit underwriter could also require such
bonds from the principal individual or corporate general partner. For a general contractor to be
paid the maximum fee, the contractor would have to post payment and performance bonds from
an “A-” or better rated company. The regulations provide that 10% retainage will be held until
projects are 50% complete. After that no further retainage may be held.

Hawaii

***Workers’ Compensation (12-10-94)                                                        FINAL
This final regulation (6/6/06) allows an employer to self-insure for workers’ compensation
insurance by “providing a security deposit in an amount equal to the greater of $1,000,000 or 1.5
times the actuarially determined annual workers' compensation future liability of the applicant.
The security deposit may be a surety bond, government bond, letter of credit, or certificate of
deposit acceptable by the director.”

Indiana

***Manufactured Home Installer License (879 IAC 1-5-1)                                       FINAL
This final rule (7/1/05) requires applicants for a manufactured home installer license to either
   1. Have general liability insurance “with products/completed operations coverage in the
        minimum amount of one hundred thousand dollars ($100,000) per occurrence, one
        million dollars ($1,000,000) aggregate,” or
   2. To post a $100,000 surety bond.




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Waste Tire Storage Sites (329 IAC 15)                                                 PROPOSED
This notice of proposed rule making would add rules to “clarify that a waste tire processing
operation that also meets the definition of a waste tire storage site because it accumulates one
thousand (1,000) or more waste tires outdoors (or two thousand (2,000) or more waste tires in a
completely enclosed structure) must register as a waste tire storage site and provide financial
assurance as required by Indiana law.” In addition, the rules would “clearly set out what
activities must be covered by a waste tire storage site’s financial assurance.” As these
regulations simply clarify existing regulations, SAA decided not to submit comments.

Kentucky

Self-Insured Workers’ Compensation (803 KAR 25:021)                               PROPOSED
This proposed rule would amend regulations regarding employers who self-insure for workers’
compensation insurance. This rule would require an employer that leaves self-insured status to
post a surety bond of at least $250,000 for 10 years and a minimum bond of $100,000 for years
11-20. SAA is submitting comments to request clarification as to whether this bond replaces, or
is in addition to, the surety bond that the employer held as a self-insurer.

Louisiana

***Radiation Protection (LAC 33:XV Chapter 3)                                              FINAL
This final rule (7/28/05) increases the amount of financial assurance required under Louisiana’s
radiation regulations to mirror the federal requirements. The required financial assurance now
required ranges from $113,000 to $1,125,000, depending on amount of radioactive material that
is handled.

Maine

***Professional Solicitor (02-041)                                                           FINAL
This final regulation (6/22/05) requires each professional solicitor, professional fund-raising
counsel, and commercial co-venturer to post a surety bond of at least $25,000.

Mississippi

***Agricultural Aircraft Operations                                                        FINAL
This final regulation (6/29/05) requires anyone licensed to conduct agricultural aircraft
operations to have proof of financial responsibility through an insurance policy, surety bond, or
other instrument. “The minimum amount of financial responsibility required for each licensed
applicator is: $100,000 Bodily injury for any one person; $300,000 Bodily injury for any one
occurrence, and $100,000 Property damage for any one occurrence for each aircraft registered.”

***State Tax Commission (Administrative Rule #1)                                             FINAL
This final rule (7/7/05) requires anyone seeking a judicial review of a final order of the State Tax
Commission to post a surety bond valued at double the amount in controversy.




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***Third-Party Payment Processor (DBCF Docket # 54)                                          FINAL
This final rule (7/7/05) requires a third-party payment processor who is used under the Nonprofit
Debt Management Services Act to “file with the Commissioner of the Department of Banking
and Consumer Finance a surety bond, issued by a bonding company or insurance company
authorized to do business in the state of Mississippi, in the principal sum of Fifty Thousand
Dollars ($50,000.00) and in an additional principal sum of Fifty Thousand Dollars ($50,000.00)
for each additional licensee it contracts with, but in no event shall the bond be required to be in
excess of One Hundred Fifty Thousand Dollars ($150,000.00). In lieu of the surety bond, a third-
party payment processor may file other assets such as cash, a certificate of deposit or government
bonds.”

Factory Built Homes (MH-5)                                                         PROPOSED
This proposed rule would require a $500 surety bond to appeal a decision of the Commissioner
of Insurance regarding factory built homes. As the amount of the bond is so small, SAA decided
not to submit comments.

Oklahoma

***Mineral Lease (725:30)                                                                    FINAL
This final rule (7/1/05) requires anyone with an oil and gas lease, salt-water disposal lease, or
seismic exploration lease for land located upon Oklahoma Tourism and Recreation Commission
property to post a performance bond.

Utah

Construction Manager / General Contractor (R916-4)                                        FINAL
These final regulations (7/15/05) allow the Department of Transportation to institute a
Construction Management/General Contractor (CM/GC) method of contracting for construction.
While bid security, payment, and performance bonds have to be provided on any request for
proposals, the rules include the following language:
   (1) The Executive Director or designee shall have the right to waive the requirement to
       provide bid security, or may reduce the amount of such security, if he or she determines
       that the bid security otherwise required by Utah Code Ann. Sections 63-56- 37 through
       39 to be unnecessary to protect the State.
   (2) The Executive Director or designee may reduce the amount of the payment and
       performance bonds below the 100% level required by Utah Code Ann. Sections 63-56-37
       through 39, if he or she determines that a 100% bond is unnecessary to protect the State.

The SAA reviewed the regulations and they implement an existing law enacted in Utah in 1996,
which allowed design-build for state DOT projects. The law permits the DOT to waive or reduce
the bonds in any such contract so that the terms of the regulation, which only state that the DOT
has the right to waive the security requirements, may not go as far as the law actually permits.
While the SAA did not submit comments on the proposed regulation for that reason, the SAA
will monitor contracts from the DOT and urge the requirement of bonds on a contract-by
contract basis.



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Virginia

Radiation Licensing (12 VAC 5-481)                                                  PROPOSED
This proposed rule would require those licensed to handle radioactive material to post a surety
bond or other security for site reclamation. The following people are exemptions from the
security requirements:
   a. All state, local, or other government agencies, unless they are subject to subdivision 4 b
        of this subsection;
   b. Persons authorized to possess no more than 1,000 times the quantity specified in
        Appendix C or combination of radioactive material listed therein as given in Appendix C,
        Note 1;
   c. Persons authorized to possess hydrogen-3 contained as hydrogen gas in a sealed source;
        or
   d. Persons authorized to possess radioactive noble gases in sealed sources with no
        radioactive daughter product with half-life greater than 30 days.

Under the proposed regulations, “the amount of the licensee's financial or surety arrangement
shall change in accordance with changes in the predicted costs of closure and stabilization….The
licensee's financial or surety arrangement shall remain in effect until the closure and
stabilization program has been completed and approved by the agency, and the license has been
transferred to the site owner.” As it is unlikely that there will be a large market for these bonds,
SAA decided not to submit comments. If SAA members would like to submit comments, please
see the information provided below:

Public comments may be submitted until August 29, 2005.
Agency Contact: Les Foldesi, Director, Radiological Health Program, Department of Health, 109
Governor Street, Richmond, VA 23219, telephone (804) 864-8150, FAX (804) 864-7902, or e-
mail les.foldesi@vdh.virginia.gov.

Pesticide Business (2 VAC 20-40)                                                         PROPOSED
Current regulations require a licensed pesticide business to “furnish evidence of financial
responsibility, consisting either of: (i) a surety bond to the benefit of the board from a person
authorized to do business in Virginia; (ii) a liability insurance policy from a person authorized to
do business in Virginia, or a certification thereof, protecting persons who may suffer legal
damages as a result of the use of any pesticide by the applicant; or (iii) a plan of self-insurance
which meets the requirements set forth below and is approved by the board.” This proposed rule
would remove options (i) and (iii), requiring a licensed pesticide business to maintain a liability
insurance policy. As there does not seem to be a market for the existing bond option, SAA
decided not to submit comments. If SAA members would like to submit comments, please see
the information provided below:

The board is extending the deadline for receipt of public comment on the proposed regulation
until September 15, 2005.




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Agency Contact: W. Wayne Surles, Executive Secretary, Virginia Pesticide Control Board, P.O.
Box 1163, Richmond, VA 232218, FAX (804) 371-8598 or e-mail
wayne.surles@vdacs.virginia.gov.

Washington

Brief Adjudicative Proceedings (WAC 308-08)                                        PROPOSED
This proposed rule would allow the department of licensing, dealer and manufacturer services to
use a brief adjudicative proceeding to determine whether a surety bond (or insurance) has been
exhausted or cancelled. As this is merely implementing a process to determine whether a bond
has been exhausted, SAA decided not to submit comments.

Wisconsin

***Manufactured Home Dealers (Comm. 5.323)                                              FINAL
This final rule (5/14/05) modifies the bonding requirements for manufactured home dealers. The
bond is different depending on whether the person is a broker or not. A “broker” is a
manufactured home dealer who has no sales lot, no inventory and no ownership interest in the
manufactured homes being sold.” The minimum net worth or surety bond that is required from a
broker and non-broker is displayed in the following tables:

Minimum Net Worth or Bond for a Non-Broker

Number of Manufactured Homes Sold Per Year         Amount
New Dealer                                         $100,000
2-50                                               $100,000
51-up                                              $200,000

Minimum Net Worth or Bond for a Broker

Number of Manufactured Homes Sold Per Year         Amount
New Dealer                                         $25,000
2-50                                               $25,000
51-up                                              $50,000




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