On July 01, 2020, Insurance Regulatory and Development Authority of India (IRDAI), an autonomous, statutory body tasked with regulating and promoting the insurance in India, has set up a nine member working Group (WG) under G. Srinivasan, director, National Insurance Academy, to study the suitability of insurers offering surety bonds for contractors.
The panel shall submit its report within three months.
- It is to be noted that, at present, Surety Bond for contractors is not being provided by insurance firms & such bonds guarantee satisfactory completion of a project by a contractor and providing performance security to various government agencies.
But the banks have been providing Bank Guarantees to contractors for fulfilling project and performance security.
Prodded by the MORTH:
The panel set up comes after the Ministry of Road Transport and Highways (MORTH) urged the IRDAI to examine possible offering such bonds by the general insurance firms in the wake of coronavirus (COVID 19) pandemic & subsequent economic impact on cash flow issues faced by Banking sector.
Terms of Reference (ToR) of the WG are as follows:
-The group will examine the present Indian legal and regulatory framework with reference to Surety Bond & access the possibility of issuance.
-It will also made recommendations with special reference to the legal and regulatory perspective.
Composition of the panel:
Other members of the panel include D. Nagalakshmi, General Manager, UIC, Roopam Asthana, CEO, Liberty General Insurance , Neelesh Garg, CEO, Tata AIG General Insurance, Hitesh Kotak, CEO, Munich Re, India, Shankar Garigiparthy, CEO, Lloyd’s Indiam, S. N. Jayasimhan, General Manager, Investment Department, IRDAI, C. Srinivasa Kumar, Deputy General Manager, Actuarial Department, IRDAI and K. Mahipal Reddy, General Manager, Non-Life Department, IRDAI.
About surety bond:
Surety bond or guaranty involves a promise made by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults, the surety bond is a promise to be liable for the debt.
About Insurance Regulatory and Development Authority of India (IRDAI):
Headquarters– Hyderabad, Telangana.
Chairman– Subhash Chandra Khuntia