FAR 28.202—Acceptability of corporate sureties.
Plain-English Summary
FAR 28.202 explains when a corporate surety is acceptable for federal bonds and how contracting officers should verify and manage that acceptability. It covers four main topics: the Treasury Department Circular 570 approved-surety list, underwriting limits and when coinsurance or reinsurance is needed, the special rules for reinsurance agreements and the use of SF 273, SF 274, and SF 275, the limited exception for foreign-country contracts where non-Treasury-listed sureties may be used, and Treasury’s notices about additions or terminations of surety authority. In practice, this section is the government’s screening tool for bond reliability: it helps ensure the surety has legal authority and sufficient financial backing to support the bond obligation. It also gives contracting officers a process for handling bonds that exceed a surety’s limit, including requiring reinsurance before final acceptance. Finally, it requires agencies to react quickly if Treasury withdraws a surety’s authority, so the Government’s protection is not left exposed on existing contracts.
Key Rules
Use Treasury-approved sureties
For bonds on contracts performed in the United States or its outlying areas, the corporate surety must appear on Treasury Department Circular 570. This is the baseline acceptability requirement for federal bonds in domestic work.
Stay within underwriting limits
The bond’s penal amount should not exceed the surety’s underwriting limit listed in Circular 570. If it does, the bond is acceptable only to the extent the excess is covered by coinsurance or reinsurance that itself stays within each coinsurer’s or reinsurer’s underwriting limit.
Follow Treasury reinsurance rules
Any coinsurance or reinsurance arrangement must comply with 31 CFR 223.10 and 223.11. When reinsurance is contemplated, the contracting office generally should require the reinsurance agreements to be executed and submitted before making a final bond determination.
Allow direct writing company bonds when specified
If the solicitation says so, the contracting officer may accept a bond from the direct writing company for the full bond requirement even if the total exceeds that company’s underwriting limit, but only until the required reinsurance agreements are executed. The contractor must submit the reinsurance agreements within the time stated in the bid form, and that period may not exceed 45 calendar days after bond execution.
Use the correct SF reinsurance form
SF 273 is used for reinsurance with performance bonds, SF 274 for reinsurance with payment bonds, and SF 275 for reinsurance in favor of the United States for other bond purposes. Using the correct form is part of making the reinsurance arrangement valid and administratively acceptable.
Foreign-country contracts have a limited exception
For contracts performed in a foreign country, sureties not listed in Circular 570 may be accepted if the contracting officer determines that using Treasury-listed sureties is impracticable. This is an exception, not the general rule, and it depends on a documented practicality determination.
Monitor Treasury notices and act on terminations
Treasury issues supplements to Circular 570 announcing new approved sureties and terminations of authority. If a surety’s authority is terminated, the contracting officer must review outstanding contracts and take protective action, including obtaining replacement bonds when appropriate.
Responsibilities
Contracting Officer
Verify that the surety appears on Treasury Circular 570 for domestic work, confirm the bond amount does not exceed underwriting limits or is properly covered by coinsurance/reinsurance, require and review reinsurance agreements when needed, use the correct SF forms, determine impracticability for foreign-country contracts when relying on a non-listed surety, and respond to Treasury terminations by reviewing open contracts and securing replacement protection if necessary.
Contractor
Provide bonds backed by an acceptable corporate surety, ensure the bond amount is within the surety’s underwriting limit or properly supported by coinsurance/reinsurance, execute and submit required reinsurance agreements within the solicitation’s deadline, and use the required standard forms when furnishing reinsurance.
Corporate Surety
Maintain Treasury approval for domestic federal bonding, stay within its stated underwriting limits, and participate in any required coinsurance or reinsurance arrangements consistent with Treasury regulations.
Treasury Department / Bureau of the Fiscal Service
Publish Circular 570 and its supplements, list approved sureties and underwriting limits, and notify federal agencies when surety authority is added, changed, or terminated.
Agency / Contracting Office
Track Treasury updates, ensure bond acceptability determinations are current, and take protective action on existing contracts when a surety’s authority is withdrawn.
Practical Implications
For domestic contracts, a bond is not automatically acceptable just because it is signed by a corporate surety; the surety must be on Circular 570 and the bond amount must fit the underwriting limit or be properly backed by reinsurance.
A common mistake is waiting until after award or after bond submission to sort out reinsurance. FAR 28.202 expects the contracting office to generally require executed reinsurance agreements before final acceptance, and the contractor may have only a limited post-execution window to submit them.
If the solicitation allows a direct writing company bond above the surety’s limit, that does not eliminate the need for reinsurance; it only permits temporary acceptance until the reinsurance paperwork is completed within the stated deadline.
For foreign performance, the exception for non-Treasury-listed sureties is based on impracticability, so contracting officers should document why a listed surety cannot reasonably be used rather than treating the exception as routine.
When Treasury removes a surety’s authority, the issue is not limited to future awards. Contracting officers must check existing contracts and decide whether replacement bonds or other protective measures are needed to protect the Government.
Official Regulatory Text
(a) (1) Corporate sureties offered for bonds furnished with contracts performed in the United States or its outlying areas must appear on the list contained in the Department of the Treasury's Listing of Approved Sureties (Treasury Department Circular 570), “Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies.” (2) The penal amount of the bond should not exceed the surety's underwriting limit stated in the Treasury Department Circular 570. If the penal amount exceeds the underwriting limit, the bond will be acceptable only if- (i) The amount which exceeds the specified limit is coinsured or reinsured; and (ii) The amount of coinsurance or reinsurance does not exceed the underwriting limit of each coinsurer or reinsurer. (3) Coinsurance or reinsurance agreements shall conform to the Department of the Treasury (Treasury) regulations in 31 CFR 223.10 and 223.11 . When reinsurance is contemplated, the contracting office generally shall require reinsurance agreements to be executed and submitted with the bonds before making a final determination on the bonds. (4) When specified in the solicitation, the contracting officer may accept a bond from the direct writing company in satisfaction of the total bond requirement of the contract. This is permissible until necessary reinsurance agreements are executed, even though the total bond requirement may exceed the insurer's underwriting limitation. The contractor shall execute and submit necessary reinsurance agreements to the contracting officer within the time specified on the bid form, which may not exceed 45 calendar days after the execution of the bond. The contractor shall use Standard Form (SF) 273 , Reinsurance Agreement for a Bonds Statute Performance Bond, and SF 274 , Reinsurance Agreement for a Bonds Statute Payment Bond, when reinsurance is furnished with the required performance or payment bonds. SF 275 , Reinsurance Agreement in Favor of the United States, is used when reinsurance is furnished with bonds for other purposes. (b) For contracts performed in a foreign country, sureties not appearing on Treasury Department Circular 570 are acceptable if the contracting officer determines that it is impracticable for the contractor to use Treasury listed sureties. (c) Treasury issues supplements to Treasury Department Circular 570, notifying all Federal agencies of new approved corporate surety companies and the termination of the authority of any specific corporate surety to qualify as a surety on Federal bonds. Upon receipt of notification of termination of a company’s authority to qualify as a surety on Federal bonds, the contracting officer shall review the outstanding contracts and take action necessary to protect the Government, including, where appropriate, securing new bonds with acceptable sureties in lieu of outstanding bonds with the named company. (d) Treasury Department Circular 570 may be obtained from the U.S. Department of the Treasury, Bureau of the Fiscal Service, Surety Bond Branch, 3201 Pennsy Drive, Building E, Landover, MD 20785 or at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm .