[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR223.11]

[Page 68-69]
 
                  TITLE 31--MONEY AND FINANCE: TREASURY
 
         CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY
 
PART 223--SURETY COMPANIES DOING BUSINESS WITH THE UNITED STATES--Table of Contents
 
Sec. 223.11  Limitation of risk: Protective methods.

    The limitation of risk prescribed in Sec. 223.10 may be complied 
with by the following methods:
    (a) Coinsurance. Two or more companies may underwrite a risk on any 
bond or policy, the amount of which does not exceed their aggregate 
underwriting limitations. Each company shall limit its liability upon 
the face of the bond or policy, to a definite specified amount which 
shall be within its underwriting limitation.
    (b) Reinsurance. (1) In respect to bonds running to the United 
States, liability in excess of the underwriting limitation shall be 
reinsured within 45 days from the date of execution and delivery of the 
bond with one or more companies holding a certificate of authority from 
the Secretary of the Treasury. Such reinsurance shall not be in excess 
of the underwriting limitation of the reinsuring company. Where 
reinsurance is contemplated, Federal agencies may accept a bond from the 
direct writing company in satisfaction of the total bond requirement 
even though it may exceed the direct writing company's underwriting 
limitation. Within the 45 day period, the direct writing company shall 
furnish to the Federal agency any necessary reinsurance agreements. 
However, a Federal agency may, at its discretion, require that 
reinsurance be obtained within a lesser period than 45 days, and may 
require completely executed reinsurance agreements in hand before making 
a final determination that any bond is acceptable. Reinsurance may 
protect bonds required to be furnished to the United States by the 
Miller Act (40 U.S.C. 270a through 270d) covering contracts for the 
construction, alteration, or repair of any public building or public 
work of the United States, as well as other types of Federal bonds. Use 
of reinsurance or coinsurance to protect such bonds is at the discretion 
of the direct writing company. Reinsurance shall be executed on 
reinsurance agreement forms (Standard Form 273 for Miller Act 
Performance bonds (formerly form No. TFS 6317), Standard Form 274 for 
Miller Act Payment bonds (formerly form No. TFS 6318), and Standard Form 
275 for other types of Federal bonds (formerly form No. TFS 6319)). 
Federal bond-approving officers may obtain the forms by submitting a 
requisition in FEDSTRIP/MILSTRIP format to the General Services 
Administration regional office providing support to the requesting 
Government organization. In addition, the forms are available to 
authorized sureties and reinsurers from the Superintendent of Documents, 
Government Printing Office, Stop: SSMC, Washington, DC 20402.
    (2) In respect to risks covered by bonds or policies not running to 
the United States, liability in excess of the

[[Page 69]]

underwriting limitation shall be reinsured within 45 days from the date 
of execution and delivery of the bond or policy with:
    (i) One or more companies holding a certificate of authority from 
the Secretary of the Treasury as an acceptable surety on Federal bonds 
or one or more companies holding a certificate of authority as an 
acceptable reinsuring company on such bonds, or
    (ii) One or more companies recognized as an admitted reinsurer in 
accord with Sec. 223.12, or
    (iii) A pool, association, etc., to the extent that it is composed 
of such companies, or
    (iv) An instrumentality or agency of the United States which is 
permitted by Federal law or regulation to execute reinsurance contracts.
    (3) No certificate-holding company may cede to a reinsuring company 
recognized under Sec. 223.12 any risk in excess of 10 percent of the 
latter company's paid-up capital and surplus.
    (c) Other methods. In respect to all risks other than Miller Act 
performance and payment bonds running to the United States, which must 
be coinsured or reinsured in accord with paragraph (a) or (b)(1) of this 
section respectively, the excess liability may otherwise be protected:
    (1) By the deposit with the company in pledge, or by conveyance to 
it in trust for its protection, of assets admitted by the Treasury the 
current market value of which is at least equal to the liability in 
excess of its underwriting limitation, or
    (2) If such obligation was incurred on behalf of or on account of a 
fiduciary holding property in a trust capacity, by a joint control 
agreement which provides that the whole or a sufficient portion of the 
property so held may not be disposed of or pledged in any way without 
the consent of the insuring company.

[34 FR 20188, Dec. 24, 1969, as amended at 40 FR 6499, Feb. 12, 1975; 41 
FR 10605, Mar. 12, 1976; 42 FR 8637, Feb. 11, 1977; 43 FR 39089, Sept. 
1, 1978]