In many areas of the economy, especially in construction – in the widest sense of the word, system manufacturing, machinery, etc, it is common practice for clients to demand security or deposits from their business partners in return for the awarding of a contract. This can be in the form of bonds or guarantees which are usually issued by the principal bank.
Specialized insurances companies can be seen as an alternative solutions provider for many companies as bonds/guarantees can be a very helpful supplement to the liquidity of a company.
Understanding Your Risks
A common and increasingly widespread alternative is to outsource the need for bonds to special insurers who – like banks – provide guarantees or bonds to contractors.
Under a bond / guarantee insurance, the insurer assumes liability for the policyholder (= client = contractor) towards third parties for a wide variety of security purposes: for example, for the contractor`s obligations under construction and supply contracts.
This offers couple of advantages:
- More flexibility by relieving credit facilities at your banks;
- Improvement of liquidity and increase of the credit line;
- Cost advantages, if applicable, as usually no fees are charged;
- High acceptance of bonding insurers at home and abroad.
The guarantees issued within the framework of the facility agreement imply, like bank guarantees, an abstract payment obligation on the part of the insurer. Before issuing a guarantee insurance policy, the insurer carries out a comprehensive credit assessment of the contractor, based on financial statements (balance sheets, profit & loss statements, etc.). Essential criteria for the premium calculation are the creditworthiness of the contractor, the bond credit facility and the types of the chosen bonds / guarantees.
Providing Tailored Solutions
- Analysis and arrangement of a tailored bond credit facility: We clarify the individual needs for bonds, in order to then design the bond facility insurance accordingly to the negotiations with the insurers.
- Adaptation of the insurance: If there are new developments in terms of demand and need of your company or changes on the insurance market, the adaptation of the contracts can be examined, e.g. inclusion of additional guarantee types, increase of the collateral framework.
- Monitoring market opportunities: We monitor the insurance markets at home and abroad and consider amendments, new opportunities (such as rental deposit guarantees) available through our international network of specialists.
- Multiple ways of support: We help with any questions that arise in connection with the processing of the bond and guarantee insurance, e.g. special wordings.
- Ongoing professional review: We review policy supplements to ensure that they are in accordance with the insurance contract and the agreements made.
Creating Added Value
We will be happy to advise you – personally and individually.
Our team of experts has many years of experience and offers customised solutions.
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