Towards Statistically Based Fidelity Rates

Fidelity rates have been established in the past primarily by the use of “informed judgment,” in accordance with the position of fidelity-surety underwriters that statistical ratemaking methods were not applicable to the bonding lines. During the last several years, this position has been modified somewhat as underwriters have recognized the increasing similarities between fidelity bonding and casualty insurance; the rate structure, however, has yet to reflect the shift of opinion. The replacement of Individual and schedule bonds by blanket coverages, particularly in the bank and commercial fields, with the accompanying shift in underwriting attention from the principal to the obligee, is probably the fundamental cause of this change in position, but there have been other more direct pressures towards statistically sounder fidelity rates.