We have voiced Surety Bond’s benefits and advocated its introduction to the Indian Market to accelerate growth & security.
We are very happy to announce that with our & associated like minded partner efforts, Surety Bonds have finally launched to India.
Hon. minister of transport & Road Highways, MR. Nitin Gadkari launches first-ever ‘Surety Bond Insurance’
The nation’s first surety bond insurance was launched by Hon’ble Mr. Nitin Gadkari, minister of roads, transport and highways on 19th December 2022.
Here is what he had to say at this key moment :
“India is well on its path to becoming a $ 5 trillion economy and in achieving the dream of Prime Minister, Narendra Modi, insurance will play an important role . To realize Modi’s dream, it is important that infrastructure projects are executed at a faster speed. Infrastructure and notably roads are vital to the economic and social growth of our country.
With this new instrument of Surety Bonds, the availability of both liquidity and capacity will definitely be boosted; such products stand to strengthen the sector. We are confident that expanding our road network will lead to more prosperity, increased employment opportunities, and increased social connectivity. Surety Bond Insurance is the right step in this direction.”Nitin Gadkari, minister of roads, transport, and highways
Why surety bonds ?
Boost both liquidity and capacity for Contractors
Contrary to a bank guarantee, surety bond insurance doesn’t need considerable collateral from the contractor. This frees up substantial assets that the contractor can use to expand their firm. The product will also significantly lower the contractor’s debt, relieving their financial worries.
Freed up working capital & No collateral allows contractors to take up more business. This builds up their capacity in taking up bigger or more projects.
Bring Stability to a volatile environment
Unlike Bank Guarantees, Surety bonds are offered by Insurance Companies. Insurance Companies are better at risk management than Banks, which are basically finance institutions.
The Surety Bond Insurance is a risk transfer tool that will cater to the requirements of a diversified group of contractors, many of whom are operating in today’s increasingly volatile environment.
The insurance companies have spread 97% of this low frequency, high severity risk to reinsurers like Munich Re & Swiss Re, which have deep pockets & efficient risk management skills.
Surety Bond Insurance secures both obligee and contractor from financial loss.
Surety Bonds are so secure that they are unconditional. This means that using Surety Bond, with only a written request being submitted, the obligee can claim money to compensate for any damages resulting from breach of contract by the contractor.
The insurance company shall not make any detailed enquiry or ask the Obligee to prove the breach of contract.
In case of breach of contract by contractor due to conditions out of his hand, such as an act of god , the surety bond comes to his rescue & protects him from further financial loss. In contrast, Bank Guarantee would have withheld collateral/margin money of the contractor in case of default.
Surety Bonds : accelerator to India’s development
As explained above, Surety bonds launch in India will boost the availability of both liquidity and capacity, along with security in a cash strapped volatile market. It stands to strengthen the market on these pillars.
Surety Bond Insurance is an effective tool for India propogating growth by allowing contractors to take up more projects as the product optimises their capital.
As the supported class of business grows, employment opportunities will increase multi-fold, thus benefiting society even further.
Advocating the need of Surety Bond Insurance, Hon. Minister of Transport, Mr. Nitin Gadkari finally remarked at the end of the launch ceremony,
“This product launch is in line with the government’s vision to up-scale the infrastructure development in the country to increase the pace of development of upcoming projects.
The government of India is making concerted efforts to implement measures that will accelerate the development of infrastructure in India and Surety Bond Insurance is a decisive step in this direction.
He said expanding road network will lead to more prosperity, increased employment opportunities, and increased social connectivity and Surety Bond Insurance is the right step in this direction.”
While Surety Bond Insurance has been launched in India, Knowledge & Awareness about the same remains low. Our experts or Surety 007s explain the concept in a fun video here.