What are Surety Bonds?<\/b><\/h5>\n
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A surety bond is a legally binding contract entered into by three parties\u2014the principal, the obligee and the surety.<\/span><\/p>\n The obligee, usually a government entity, requires the principal, typically a business owner or contractor, to obtain a surety bond as a guarantee against future work performance.<\/span><\/p>\n What is the aim of Surety Bonds?<\/b><\/p>\n Surety bonds are mainly aimed at infrastructure development mainly to reduce indirect costs for suppliers and work contractors, thereby diversifying their options and acting as a substitute for bank guarantees.<\/span><\/p>\n These bonds are provided by the insurance company on behalf of the contractor to the entity which is awarding the project. <\/span>When a principal breaks a bond\u2019s terms, the harmed party can make a claim on the bond to recover losses.\u00a0<\/span><\/p>\n Hence, it can effectively replace the system of bank guarantees issued by banks for projects and help reduce risks due to cost overrun, project delays and poor contract performance.<\/span><\/p>\n Firstly, <\/b>the surety bond is a risky concept and insurance companies in India are yet to achieve expertise in risk assessment in such business.<\/span><\/p>\n Secondly,<\/b> there’s no clarity on surety bonds pricing, the recourse available against defaulting contractors and reinsurance options. These are critical and may impede the creation of surety-related expertise.<\/span><\/p>\n Source<\/b>: This post is based on the article \u201cSurety bonds: Slow take-off likely as pricing, reinsurance concerns remain\u201d <\/b>published in Indian Express <\/b>on 5th Feb 2022.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":" What is the News? In Budget 2022-23, the government has allowed the use of surety insurance bonds as a substitute for bank guarantees in case of government procurement and also for gold imports. What are Surety Bonds? A surety bond is a legally binding contract entered into by three parties\u2014the principal, the obligee and the… Continue reading Surety bonds: Slow take-off likely as pricing, reinsurance concerns remain<\/span><\/a><\/p>\n","protected":false},"author":10317,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,9],"tags":[10500],"class_list":["post-166889","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-public","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/166889","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10317"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=166889"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/166889\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=166889"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=166889"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=166889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What are the issues with the decisions taken in the Budget on Surety Bonds?<\/b><\/h5>\n