A Surety Bond is a risk transfer mechanism wherein an Insurer provides a guarantee to a Beneficiary or Obligee that the Principal or contractor will meet his contractual obligations. In case the Principal fails to deliver his promise, a monetary compensation is paid to the Obligee by the Insurer

A contractor who has been awarded with a contract to execute a project / supply machineries and required to provide security to the obligee / project owners at bidding and performance stages of contract, can obtain this policy

Surety Bond is designed to provide protection against breach of terms & conditions by the contractors either during the bidding stage or during the performance stage of a project.

Operates as an alternative of earnest money deposit and if the Contractor fails to accept the contract post winning the bid, Surety pays the Obligee earnest money or the cost of retendering or cost of differential between the original bidder and the next best bidder.

Typically, this bond offers coverage against the principal not being able to mobilise the requisite resources as defined in the contract but has taken advance from the Obligee (Beneficiary) and the delay caused due to such non-mobilisation of resources may result in project delays which an Obligee may claim from the Principal as per the Contract Terms.

This type of Bond can be raised by the Obligee in case the principal fails to perform the contractual terms and execute the project to its fullest, such bond can be raised at various milestones of the project or at the end of the project if the completion of said project is delayed or is not in accordance with the Contractual Terms.

Certain contract warranty that a portion of Contract will be retained for a specified period to ensure that the project has completed satisfactory performance period or machinery has performed to its proposed capabilities. Currently many Obliges keep 10% - 20% of the machine value as the retention money and is released after specified time period (Typically 1 year in case of Capital Goods, 1-3 years in case of Projects like Bridges, Culverts etc)

A conditional bond is also known as a default bond. Where If, certain conditions are met, the surety may be required to pay a set amount to the oblige or beneficiary. Whereas an unconditional Bond allows the oblige/ beneficiary to claim the money almost without any conditions. (except for some minor conditions such as the requirement of a written request being submitted within the valid term of the bond, etc.). In case of an alleged breach of contract, the beneficiary can use the unconditional bond to claim the money from the Surety immediately to compensate for any damages resulting from such breach.

Premium rates depends on various factors such as financial health of the company, project tenure, contract value along with other factors such as age of the company and credit score.

Maximum bond tenure is 60 months (including contract, maintenance period and extensions) or based on the Contract bond, whichever is lower.

• ♦ Contract termination between principal & beneficiary prior to insurance
• ♦ Changing terms of contract without the knowledge of the Surety insurer
• ♦ Gross Negligence, illegal /criminal acts by both principal & beneficiary
• ♦ War/Act of God/Nuclear Perils
• ♦ Fraud/Collusion
• ♦ Non-performance or non-fulfilment of terms /conditions of the contract
• ♦ Any third party loss not part of the contract
• ♦ Any price fluctuation in execution of the project

• ♦ Details of contractor including financials, past contracts, etc
• ♦ Details of beneficiary
• ♦ Project details
• ♦ Financing sources
• ♦ Contract requirement of security bond. Relevant clauses & conditions of contract
• ♦ Duly filled proposal form along with latest financials of contractor

Besides signed proposal form and other mandatory documents, we require indemnity letter from the insured while placing the business.

No, currently only projects within India are covered.

Currently surety bond is provided only to public beneficiaries.

In case project is not completed, there can be extension to surety bond issued; however, maximum tenure of the policy will be 60 months including extension.

By writing mail to "info@finocred.in"

Yes, currently only rated companies are issued surety bonds.

No, surety bond for individual contractors are generally not issued.

• ♦ Duly Filled Proposal form, answering all the questions (form is attached with this mail)
• ♦ Corporate Presentation of client
• ♦ List of key personnel showcasing technical capability if it is not covered under Corporate Presentation
• ♦ Rating Certificate
• ♦ Last five years financials including latest financials (in case JV, please provide financials of each of the companies)
• ♦ Details of past projects completed and present projects
• ♦ Details of future orders
• ♦ Present work Order / Tender bid document for which surety bond is sought
• ♦ Contract / RFP, if the work order refers to conditions mentioned in RFP or bidding documents
• ♦ If full set of contract is not provided, relevant clauses and conditions of contract dealing with Contractor's responsibilities including the requirement of Surety Bond Insurance or Performance Guarantee
• ♦ Details of financing sources for the proposed project
• ♦ Contractor's Licence issued by PWD or other equivalent authorities (in case of Construction Infra Projects)
• ♦ Details of current facility client is having like BG, BG rate, collaterals or cash margins kept with Bank, etc.

Yes, full details of each of JV partners is required in case project is going to be executed by SPV.

Maintenance or DLP period is covered only if surety bond insurance is provided during project period.

Bid bonds are generally written only if there is no issue to write performance Bond. One of the reasons to invoke bid bond is non-submission / deposit of performance bond.