What is an Athletic Promoter Bond?
Athletic promoter and agent bonds are a subset of the broader financial guarantee bond category that must be filed with the state government agency responsible for regulating combative athletic promoting activity in the promoter’s jurisdiction.
Athletic promoter bonds must be issued by insurance carriers admitted in the state where the government agency requiring the bond resides. The insurance carrier issuing any surety bond, such as an athletic promoter bond, will also be referred to as the “surety company” or the “bond company”. Athletic promoter bonds refer to the promoter as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Why is an Athletic Promoter Bond Required?
Athletic promoters are required to purchase financial guarantee bonds by state statutes to protect a government agency by transferring to a surety bond company the cost of ensuring the state is compensated for damages resulting from an athletic promoter breaking applicable agency law. The surety company provides the government a guarantee (the surety bond) that the clients of an athletic promoter will receive payment for financial damages due to a violation of the statutes and regulations referenced in the bond form up to a limit specified in the bond (“penal sum” or “bond amount”). Ultimately, athletic promoters are responsible for their actions and required by law to reimburse the surety company for any payments made under the bond or face indefinite license suspension and civil action.
Athletic promoter bond violations triggering a bond payout may include a promoter failing to provide payment on behalf of their client(s) while acting as an athlete promoter.
How Much Does an Athletic Promoter Bond Cost?
Athletic promoter bonds generally cost between 1.5% and 10% of the bond limit.
Example: $10,000 Athletic Promoter Bond Cost
|Credit Score||Premium Rate||Bond Cost|
|680 or above||1.5%||$150|
|499 or below||10.0%||$1,000|
The actual cost of a specific athletic promoter bond can vary widely depending on the risk associated with legal precedent in the jurisdiction, the language in the bond form and the promoter’s license history, experience and creditworthiness..
Is a Credit Check Required for Athletic Promoter Bonds?
Credit checks are required for athletic promoter bonds and, ultimately, the surety insurance company determines how it will underwrite and price a surety bond.
How does the wording in the bond form impact the cost of an Athletic Promoter bond?
The bond form is a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and promoter (principal). While many bond forms use similar language, each bond form can be customized by the government agency requiring the specific bond and may contain provisions that increase potential costs for the surety company, which will ultimately be passed on to the promoter via higher bond premiums, stricter underwriting or collateral. The primary text to consider in an athletic promoter bond surrounds (1) aggregate limits, (2) cancellation provisions and (3) forfeiture clauses.
Bond forms always specify the penal sum defined as the maximum amount of financial damages any single party can recover from the bond related to a single claim occurrence. Most bond forms also contain a clause which limits the amount of financial damages from all parties and all claims to a specific amount (“aggregate limit”), usually the same amount as the penal sum. For example, a $15,000 athletic promoter bond with an aggregate limit of $15,000 will pay out no more than $15,000, regardless of the number of damaged parties or claim occurrences. Athletic promoter bonds without an aggregate limit will be more expensive than a bond with similar coverage containing an aggregate limit.
Most bonds contain a provision allowing for the surety company to cancel the bond (“Cancellation Provision”) by providing a notice to the athletic promoter and government agency requiring the bond with the cancellation taking effect within a set period of time, usually 30 days (“Cancellation Period”). Cancellation provisions allow the surety company to cancel the bond for any reason, but most often due to the promoter failing to pay premiums due, claim payouts, or material changes in the promoter’s credit score. Athletic promoter bonds with no cancellation provision or cancellation periods greater than 30 days will be more expensive than a bond with similar coverage containing a standard cancellation provision.
Surety bond claims are paid by surety companies to damaged parties to reimburse that party for the financial loss incurred up to the bond penalty amount. Certain bonds contain a clause which requires the surety company to pay the full bond penalty to the damaged party, regardless of the actual damages incurred (“Forfeiture Clause”). Athletic promoter bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.