TATA AIG General Insurance, has rolled out Surety Insurance Bonds to support the government’s ambitious agenda on infrastructure development, which has been allocated 3.3 percent of the GDP in FY 2024.
Put simply, a Surety Insurance Bond covers the project owner or beneficiary against losses arising from the contractor’s non-performance, non-fulfilment, or breach of contractual obligations as stipulated in the agreement or bidding documents.
Deepak Kumar, Senior Executive Vice President & Head – Reinsurance, Credit & Aviation Insurance, TATA AIG General Insurance, said, “With the launch of our Surety Insurance Bond, TATA AIG is committed to addressing the critical liquidity and capital challenges faced by contractors in the infrastructure sector. We are confident that this product will not only facilitate smoother project execution, but we will also contribute in our own way to the infrastructure segment towards India’s goal of becoming a $ 5 trillion economy”.
With this range of surety bonds, Tata AIG is cementing its dedication to fostering growth and development through innovative insurance solutions for the country’s infrastructure companies, he said.
Available in conditional and unconditional formats, TATA AIG Surety Insurance Bonds have been designed to facilitate smoother execution of infrastructure projects and commercial contracts in the government and private sectors, catering to diverse project needs.
In recent days, Surety Insurance Bonds have emerged as a robust alternative to traditional bank guarantees for contractors. By opting for Surety Insurance Bonds, contractors can unlock capital and enhance their bidding capacity, thereby overcoming liquidity and capital constraints.
TATA AIG’s current product suite includes the contract bonds permitted under IRDAI guidelines, such as bid performance, advance payment, and retention money bonds.
Last year, IRDAI Chairman Debasish Panda highlighted that India is expected to spend about ?100-lakh crore on infrastructure through the National Infrastructure Pipeline in the next five years. This requires bank guarantees of about ?90-lakh crore in the next five years, which banks currently do not have the capacity for. This is where surety bonds need to step in to complement bank guarantees, he had noted.
This is important as India is estimated to become the third-largest economy by 2030.
A surety bond is a legally binding agreement between three parties: the obligee (the entity requiring the bond), the principal (the party required to fulfil a certain task or duty), and the surety (the party ensuring that the principal can perform the assignment). The surety bond, which is most typically used in construction and infrastructure projects, guarantees that the principal will meet the commitments indicated in a contract. If the principal fails to meet these obligations, the surety compensates the obligee, reducing their financial risk.
