Surety is one of the more attractive corners of the insurance market. The business is consistently profitable. The guarantee structure means carriers rarely pay claims they didn't anticipate. Loss ratios are low, and so is the combined ratio. What gets discussed less often is the other side of the equation: the expense ratio is the highest in insurance.
The reason is operational. Surety is a coordination-intensive business, and much of that coordination is still manual.
"Some of the largest Surety carriers receive bond forms as boxes of paper," says Vinod Kachroo, Tinubu's Head of Business, Americas. "Not even emails. Leading agencies issue bonds on their behalf, and they send boxes of paper across the country."
The bond is legally in force. But the information it contains isn't in any system that can use it. Someone has to key it in by hand.
The question is whether the industry could be more profitable if it organized itself differently. Could Surety have a digital repository where every legitimate party accesses the same bond instantly? Could blockchain, the most-hyped technology in financial services, be part of the answer?
Four Parties, One Document
Every Surety bond involves four parties — broker, carrier, principal, obligee — each with a legitimate stake in the same underlying record. Yet they operate largely in isolation, exchanging documents rather than data. Information gets re-keyed at each handoff. Errors compound. Costs add up.
The Obligee Equation
At the far end of the chain sits the obligee, the party that requires the bond. In many cases, that's a public body: a city, a county, or a state agency. This is where the industry runs into a particularly entrenched form of perceived resistance to change.
The conventional wisdom is that obligees will never accept electronic bond documentation. Kachroo doesn't find the argument convincing. "I heard the same thing when I was working for a large life insurance company, and we were the first to do digital signatures," he says. "Everybody said, 'You can't do it.' Then you start going through the process. The belief is that compliance/regulators will never allow it. But you go to regulators and they ask how you will protect the customer’s interest with this new method. You resolve that question, then the others: how you will validate the signature, how you lock it, the privacy concerns, the security concerns. They see the efficiency benefit for the customer and eventually say yes."
The obstacle, in his view, isn't regulatory principle. It's that no one has started the conversation. "Who has gone and picked a municipality and said, 'let me talk to you?'" he asks. "'You consume 10% of my bond business. If I gave you electronic access to a bond, what would your concerns be?'"
What a Universal Repository Would Look Like
The concept is straightforward, even if the execution requires real industry coordination. Today, each party maintains its own siloed records. Information gets re-keyed, re-filed, and re-verified at each step. A single industry repository would change that, holding the authoritative record of a bond and making it accessible to all four parties with appropriate permissions.
"I am a big proponent of creating an industry digital repository of bonds which all legitimate parties have access to," says Kachroo, "so you can exchange these digitally between those four players who need to be looking at it, and they are digitally stored rather than being shipped on paper or emailed and rekeyed, adding expense and increasing the risk of errors."
The bond would be created once, at source, then digitally locked and shared with the other parties. It couldn't be changed after issuance. Each party would see the same record. The same data would never be keyed into multiple systems by multiple people.
For carriers that already have systems of record, the architecture would connect rather than replace. "It gets linked," says Kachroo, "and the data gets automatically moved over. You could set up the APIs to automatically do that." A carrier using a platform like Tinubu's would find that their system of record stays intact. It simply receives a verified data feed from the repository, instead of a box of paper.
Blockchain as an Option
Blockchain can be the right tool for this because of one specific property: immutability. A paper bond can be fraudulently reproduced. A digital document stored in a conventional system can be altered. A blockchain record, by design, cannot be.
"Blockchain is just a medium to digitally record a bond and then allow everybody to have access to the same exact digital copy while maintaining security," says Kachroo.
The technology has already proven itself in adjacent contexts. "Blockchain is not new," Kachroo notes. "It has been extensively used for similar use cases within the financial services industry. If banks can use it, if wealth management can use it, and other lines of insurance can use it, so can Surety."
The Regulatory Question
Regulators' underlying requirements don't change under this model. Only the method of meeting them does. "They need access to a gold standard copy of the data," says Kachroo. "They want to make sure it is the authentic copy and it is not being changed or manipulated by a third party. The requirements stay the same. What changes is how you do it."
The Operational Upside
The case for a universal bond repository is not that the industry is broken. The business runs profitably. But it carries operational costs that don't have to be as high as they are, and the technology to address them is already proven in adjacent industries. The expense ratio is the one number Surety players can control directly — and a bond repository, built on a blockchain foundation, could move that number in the right direction
