July 16, 2009

U.S. broker enters Canadian surety market

IAN HARVEY

correspondent

A little bit of Philly is coming to Toronto.

U.S.-based surety broker, Rosenberg & Parker, has launched a Toronto office, looking to expand its footprint outside of its Philadelphia home for the first time in 62 years.

While the company has done business all over the U.S., the Toronto office is the first outside of its hometown and marks a giant step for the boutique brokerage.

Torontonian Sheila Thompson — a veteran of the sector — heads up the new office and is excited about what the future holds.

The big question then becomes: Why? Why open an office in the midst of one of the worst recessions in history with pullbacks in construction rippling across continents while credit and easy money has all but dried up?

“There are a couple of reasons,” says Thompson, who started 25 years ago in the sector with Harry Price, Hilborn which was later bought up by Marsh & McLennan. Most recently she was with Hunter Keilty Muntz & Beatty as vice-president, surety.

“Canada has always been an attractive place for a company like Rosenberg & Parker and these plans were made before the recession struck.”

Even so, she says, it’s not a bad time to be opening the doors of a new office in a new country and new city.

With already-bonded projects starting to wind down, sitting in the trough between waves is a good position to be when things start to lift, says Thompson, who is also director and treasurer of the Canadian Association of Women in Construction, a member of the Toronto Construction Association (TCA) and The Risk and Insurance Management Society of Canada (RIMS Canada).

She is also the only broker representative on the Canadian Construction Documents Committee’s surety subcommittee.

“The only issue in Canada is that we don’t know yet where that infrastructure money is going,” she says.

“In the U.S., the contracts are actually stamped with ‘stimulus funding’ but that doesn’t happen here. So we’re waiting to see where the money goes.”

As one of the largest surety brokers in the world, Rosenberg & Parker has kept the leadership in the family for generations. It’s also a hands-on operation with principals involved at every level with each client.

Doing business on either side of the border isn’t so different, she adds.

“Sure there are subtle differences,” she says.

“In the U.S., for example, you have the Miller Act (a law that requires public agencies to engage contract sureties on public projects) and the Little Miller acts (similar laws for local and state agencies).

“While it’s not legislated in Canada, public agencies still tend to use 100 per cent bonds and 50 per cent bonds and in any event it’s the same three party arrangement with the principal, the obligee and the surety.”

For boutique brokers like Rosenberg and Parker, it’s also an opportunistic era, she says, since many of the bigger surety brokers are owned by large insurance companies which themselves are having some liquidity issues as the ripples from the credit crunch move through the financial-services sector.

Besides, she says, Canada is well positioned to recover and with it the construction sector, which means there will be opportunities to underwrite project performance.

“What we bring to the table are some very good contacts with high-level surety companies because we invest the time to cultivate those relationships,” she says.

“We like to say we work with clients to achieve their dreams.

“They all have dreams to grow their companies and to do they often need someone to guide them through the surety maze.”

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