Union Minister for Road Transport and Highways Nitin Gadkari launched India’s first-ever ‘Surety Bond Insurance’ product from Bajaj Allianz General Insurance Company to reduce the dependence of infrastructure developers on bank guarantees.
- The product was introduced in response to the demand identified by the Infrastructure sector and the Government of India (GoI).
- It shall be used as a substitute to bank guarantees.
- This product launch is in line with the GoI’s vision to up-scale the infrastructure development in India, to increase the pace of development of upcoming projects.
About Surety Bond
i.The Surety Bond Insurance is a risk transfer tool for the principal (contract awarding authority) and shields them from the losses that may arise, when the contractor fails to perform their contractual obligation.
ii.The insurance product will provide a contract of guarantee upon contractual terms to the principal, and other business deals will be concluded in accordance with the mutually agreed terms.
- If the contractor fails to fulfil the contractual terms, the principal can raise a claim on the surety bond and recover the losses that were incurred.
i.Unlike a bank guarantee, the Surety Bond Insurance does not require large collateral from the contractor thus freeing up significant funds for the contractor, which they can utilise for the growth of the business.
ii.The product will help in reducing the contractors’ debts and will also facilitate the growth of upcoming infrastructure projects in India.
Recent related news:
In July 2022 Bajaj Allianz General Insurance Company Limited became the first company to launch Pay As You Consume (PAYC), an add-on motor insurance cover under the Insurance Regulatory and Development Authority of India’s (IRDAI’s) Sandbox Regulations.
About Bajaj Allianz General Insurance Company Limited:
Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Finserv Limited and Allianz SE.
Managing Director (MD) & Chief Executive Officer (CEO) – Tapan Singhel
Headquarters – Pune, Maharashtra
Establishment – 2001