What is a Surety Bond?
Many private and public contracts require some form of security, usually in the form of a surety bond, effectively a third-party guarantee. They are generally offered by banks and insurers, whose credit ratings are typically better than those of most companies, and thus represent good security.
A surety bond is not a policy of insurance, so the wordings are not fixed but generally up for negotiation, and the wording matters. Banks will usually count a bond as part of an overall funding facility and are not concerned by wordings. Insurers, however, are typically unsecured (other than a corporate counter indemnity) and don’t want to provide a bond where payment has to be made ‘on demand’ in other words, without recourse to you, the client.
What Can We Offer?
Having extensive experience in the surety market, we can provide advice on the way bonds work, and what the insurers will need to provide quotes. We have access to a variety of underwriters who are able to offer bonds across a diverse range of sectors.
Whether you are looking for a single bond or a facility, as surety specialists we are able to identify the most suitable solution for your company whilst providing advice on bond wordings and the mechanics behind these.
Some examples of the types of bonds we can offer are below; however, this is not an exhaustive list so please get in touch for any of your surety requirements:
- Duty Deferment – Used by importers to manage the payment of duty on goods and are issued to the benefit of HMRC.
- Performance Bonds – For construction businesses, required by main contractors to help guarantee the satisfactory completion of a project.
- Retention Bonds – again for construction businesses, these can replace payment retentions, freeing up cash and valuable time as payment retentions are notoriously difficult to collect.
- Highways/sewer – Required from house builders by local authorities to help the council mitigate risk.
- Pension Bonds – Typically where a private business acquires a local authority or Government run institution, a pension bond to protect the pension of the workers transferred.
- Reclamation Bonds – Usually required when a business is seeking a permit to start mining or other related operations at a specific site. A reclamation bond provides a guarantee that the land being disturbed is restored to an acceptable condition after use.
- Travel Bonds – As a travel operator or travel agent, you may be required to provide security to protect customers who have made payments in advance of travel. This form of bond provides the security required, in the event that customers require repatriation costs due to your insolvency.
For further information and support, contact us to speak with one of our team of experts.
Download our ‘Bluffers Guide to Surety’. It is designed for those new to surety and provides an overview of the terminology you will encounter.