Subdivision bonding through a private bonding company instead of letters of credit

Does any other municipalities accepts a subdivision bond through a private bonding company (i.e. Jardine Lloyd Insurance company in Victoria BC) for subdivision security instead of the usual letter of credits provided by the banks? If so, is this secure and risk free or is there a risk that we would not get paid for damages if needed? I'm used to letter of credits on account where if we don't get paid by the developer, we can just cash in the letter of credit and we get paid by the bank. This is new to me. Any help would be greatly appreciated, thanks.

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  • Michelle, did you ever receive any feedback on this question? If so, I'd like to chat with you. [email protected]

    Or, if anyone has any information to add, I'd like to hear it.
    Thank you.

    Lorraine Coughlin
    Manager of Financial Services
    Town of Gibsons

  • No I did not, but I did ask a developer who facilitated a course that I took . He told me that the risk is that the bonding is through a private company instead of a financial institution. So I would need to vet the company bonding the development security with references etc. He advised me that I should do some background checks on the company issuing the bonding to understand whether they have had instances where they didn't pay out when required, how long they've been in business etc. We chose to continue to ask our developers to use letter of credits because we are too small to administer that extra vetting. The developer in our case chose to pay in cash their securities because of the large fees that was being charged to them from their bank for letter of credit. I was also told by my representative at First Credit Union, that FCU does not charge large fees for letter of credits and would recommend that the developer use the letter of credit and invest the cash instead of just paying it.

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