In a groundbreaking move, the Honorable Minister of Finance, Mrs. Nirmala Sitharaman, introduced Insurance Surety Bonds, including License & Permit Bonds, in India as part of the Union Budget in 2022. This significant development was welcomed with open arms by both industry experts and businesses alike. With the Insurance Regulatory and Development Authority of India (IRDAI) strongly recommending the launch of Surety Bonds, many public sector undertakings (PSUs) have already started accepting these bonds in their tender processes. This monumental boost has invigorated the Surety Bonds market in India. It has prompted contractors of all sizes to swiftly transition to Surety Bonds as a replacement for traditional Bank Guarantees.
The Power of License and Permit Bonds
Among the various forms of Surety Bonds, License and Permit Bonds hold paramount importance. These bonds act as a viable alternative to the deposits required by licensing authorities in India for obtaining licenses or permits to engage in specific types of work. Examples of such licenses include Insurance Broker License, Class A Contractor License, Import and Export License, Tourist Permit, and Retail Drug and Pharmacy License, among others.
The Need for Mandatory Surety Bonds in Licensing
License deposits in the USA often experience loss ratios of less than 20%. Given this statistic, it becomes imperative to make Surety Bonds mandatory for licenses and permits in India. This move will unblock a large chunk or Working Capital for businesses. It is crucial for IRDAI to fulfill its commitment and promptly authorize Insurance Surety Bonds for licenses such as
- Composite Insurance Broker License – Requires INR 5 crore as capital requirement
- Insurance Broker License – Requires INR 75 Lacs as capital requirement
- Corporate Agent License
- Individual Agent License, and more.
By leading the way in this aspect, IRDAI will pave the path for other organizations in India to follow suit.
Tapping into a Multibillion-Dollar Market of License and Permit Bonds in India
The License and Permit Bonds market in India is nothing short of staggering, estimated to be around INR 500 billion. Rough calculations put the Gross Written Premium (GWP) value for License & Permit Surety Bonds at an INR 10 billion (or INR 1000 crores). This market presents a tremendous opportunity for companies aspiring to establish themselves in the Surety Bonds space in India. The roadmap laid out by IRDAI for License and Permit Bonds will instill confidence in both PSUs and private organizations, fostering further growth in the entire Insurance Surety Bonds market, including Bid Bonds, Performance Bonds, Advance Payment Bonds, Retention/Maintenance Bonds, and Trade Bonds.
Surety Seven (007): Pioneering the (License & Permit) Surety Bonds Space in India
Surety Seven (007) takes immense pride in being one of the few companies in India dedicated to providing Surety Bonds. We are actively working to streamline the process of License & Permit Bonds by implementing robust technology solutions. Our solutions will enable the issuance of License and Permit Bonds entirely online, catering to those seeking them seamlessly. We eagerly anticipate IRDAI’s proactive support in advancing License & Permit Bonds. IRDAI must lead the charge and creating provisions for their immediate acceptance.
License & Permit Bonds: Creating Confidence in the Indian Market
License and Permit Bonds will not only instill confidence in reinsurers concerning the Indian market but also pave the way for remarkable growth in the Insurance Surety Bonds space. Industry experts estimate this market to reach an impressive $8-10 billion GWP within the next five years. Surety Seven (007) remains at the forefront of this market, leveraging its expertise and commitment to drive progress.
As India embraces Insurance Surety Bonds, Surety Seven (007) stands ready to serve businesses across the nation. The introduction of License and Permit Bonds, spearheaded by IRDAI, marks a significant milestone. It can foster efficiency and trust within the licensing and permit space. With a focus on cutting-edge technology and a firm commitment to delivering exceptional service, Surety Seven (007) is poised to revolutionize the Insurance Surety Bonds market in India. Together, we can build a future where Surety Bonds play a vital role in enhancing business growth and ensuring compliance throughout the nation.