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:
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
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.
Related Solutions
Trade Credit
Liability
Transportation & Logistics
Latest Insights
EVER GIVEN – One Year Later
The shipping accident in the Suez Canal has far-reaching consequences for supply chains. Ultimately, this also pushes transport insurance to its limits.
A risk management look beyond the horizon
Events can lead to business interruptions and production shutdowns without causing any property damage. This is a difficult risk management starting point.
Disrupted supply chains and their consequences
Since the outbreak of the Corona pandemic two years ago, disrupted supply chains have threatened the existence of many companies.
Lisbeth Lorenz
Group Practice Leader Credit & Political Risk
T +43 5 04 04 280