New India Assurance said it entered the surety insurance bonds business, becoming the second such domestic insurance company. IRDAI had permitted general insurers to issue surety insurance bonds in April 2022.
Surety bonds are legally enforceable tripartite contracts that guarantee compliance, payment and/or performance.
The issuing insurer provides guarantee, for a premium, in case of a default in execution of a project. It assures one party (obligee) that the entity (principal) responsible for the project or service delivery delivers on the project in a time bound manner by adhering to the prescribed stipulations.
The principal is also reassured that the surety will assume responsibility for timely payments. If the principal defaults on the performance, the surety insurance provider pays damages to the obligee.
Neerja Kapur, chairman and managing director of New India Assurance Co, said, “Surety bonds will go a long way to revolutionise the dynamics of the infrastructure industry. Surety bond insurance will act as a security shield for infrastructure projects and protect the interests of both the contractor as well as the principal… our surety bonds will provide much-needed financial reassurance to all parties involved in infrastructure projects.”
