Surety Bond Insurance
About the Policy
Surety Bond Insurance serves as a risk transfer mechanism and an effective alternative to traditional Bank Guarantees, providing protection to the Beneficiary / Project Owner against potential losses arising from the Contractor’s failure to fulfil contractual obligations. The product ensures that the agreed contractual terms and business commitments between the parties are honored as per mutually agreed conditions. In the event of non-performance, default, or breach by the Contractor, the Beneficiary may invoke the Surety Bond and recover the resultant losses in accordance with the contractual and policy terms. Unlike a Bank Guarantee, Surety Bond Insurance does not generally require large collateral or margin money from the Contractor, thereby freeing up working capital for the Contractor to channel into project execution and business growth.
Important details
Features
- Indemnification to the Beneficiary for financial loss arising from the Insured’s default
- Obligation triggered as per the bond type and bond terms
- Operates strictly on an indemnity basis
- Liability limited to Bond Value
- Surety acquires subrogation rights against the Insured post indemnification
Refer to the policy wordings for further details.
Exclusions
The Surety may be released from its obligations under this Surety Bond and shall not be liable in situations such as:
- The underlying contract is not valid, not established, cancelled, or terminated before the insured risk occurs.
- Any intentional, grossly negligent, illegal, or criminal acts by the Beneficiary and/or the Insured.
- Collusion between the Insured and Beneficiary to violate the contract.
- Any change to the contract without the Surety’s prior written consent.
- Losses involving third parties that are not part of the original contract.
- Failure of the Insured to pay the premium or provide required indemnities/security.
- Events—including force majeure—that make project execution impossible as per the contract or applicable law.
- Any loan, lease, debt, or financial transaction, as the Surety Bond does not operate as a financial guarantee.
Refer to the policy wordings for further details.
