Bond Broker Eases Surety Burden

Auckland surety broker Bonded NZ has placed or is negotiating around $200 million in performance bonds since the company began business less than two years ago.

Founder-director John Earwaker said major Australian contractors were among his biggest clients, seeking bonds for large infrastructure projects throughout Asia, the Middle East and within Australia.

“We haven’t scratched the surface yet and we are now convincing New Zealand contractors that they don’t have to go to a bank and provide asset backing for their performance bond needs,” Mr Earwaker said.

“We have also started talking to SMEs, local contractors who perform a secondary role to the major builders’ work, about using our services and we are getting a good response.

“They might be building an apartment block or hotel, a school playground or upgrading footpaths but they all need performance bonds.”

Usually 10% of project value, bonds provide a guarantee of contractors’ satisfactory performance and cost the costs of faults that might arise.

Mr Earwaker, an Auckland insurance broker with more than 40 years in the industry, decided in 2004 it was time for a change and took his idea for a home maintenance warranty to Macquarie Bank in Sydney to discuss Australian distribution.

“It would have enabled the real estate industry to give complete satisfaction to home buyers,” he said. “If anything went wrong it would be fixed under the warranty.

“Macquarie loved it and wanted to put it into Australia, initially with a 5% shareholding but as negotiations went on it grew to a point where it was being taken out of my hands and I walked away.

“I went back to the drawing board and my home warranty idea developed into contract bonds.”

Mr Earwaker and solicitor friend Tony Thomas approached offshore insurance companies dealing in performance bonds and became their New Zealand agent, launching Bonded NZ in October 2007.

Mr Thomas and insurer Tony Whyte joined Mr Earwaker as directors.

“Our competition was at first the banks but with the credit squeeze we are now complementary,” he said. “We are easing the previous total dependence of the New Zealand construction industry on the local banking sector.

“We are bringing bonds to the market from top international underwriters who do not require the collateral a bank wants – and we are the only intermediary offering non-bank Standard & Poor’s A-rated bonds in New Zealand and Australia.”