Insurance Surety Bonds

• National Highways Authority of India organized a brainstorming session with stakeholders for expediting adoption of Insurance Surety Bonds for NHAI contracts.
• NHAI has urged insurance companies and contractors to analyze use of Insurance Surety Bonds as an additional mode of submitting Bid Security and /or Performance Security Deposit.
• The Insurance Surety Bonds, when issued, would be cost effective and provide adequate security for NHAI projects.

ABOUT INSURANCE SURETY BONDS

• Insurance Surety Bonds are instruments where insurance companies act as ‘Surety’ and provides the financial guarantee that the contractor will fulfil its obligation as per the agreed terms.
• Surety bonds act as a viable option to bank guarantees and offer longer maturity terms than the traditional banking products.
• Ministry of Finance has granted equivalence status to e-BGs and Insurance Surety Bonds, aligning them with BGs for all government procurement processes.
• They are one of the most cost-effective ways to finance contract security options and could provide an estimated capital relief of Rs. 50,000 crore for the infrastructure sector.