BOND INSURANCE – INSURED RISKS AND WHO ARE THEY ADDRESSED TO

BOND INSURANCE – INSURED RISKS  AND WHO ARE THEY ADDRESSED TO

Even if  it seems an insurance class that at the first glance does not provide a variety of products, we are proposing this time a breakthrough in the world of bonds, through an analysis of each type of products: what it covers and to whom it is addressed.

It is known that bond insurance is an alternative to bank guarantee letters and the fact that they add a plus of comfort to policyholders / companies through the easier way of obtaining them and through the flexibility of collateral required as counter-guarantee.

Moreover, under the current economic conditions where only a small number of companies qualify for a bank lending facility, companies’ interest in alternative guarantee instruments will continue to grow. As statistics show now, according to the latest analysis published by Mr. Iancu Guda – General Manager of Coface Credit Management Services and President of the Association of Banking and Financial Analysts in Romania – up to 15% of Romanian active companies can be credited.( https://iancuguda.ro/contributii-editoriale/creditarea-companiilor-incotro/).

That means out of about 424,000 active companies, only about 63,000 companies meet the lending conditions of banks. What’s happening to the rest of the companies? How could they continue their activity in terms of obtaining new contracts? How could some of the companies accepted by banks reduce the pressure on their non-cash facility granted by banks? A possible solution is precisely the guarantee through the insurance policy- BOND INSURANCE.

In order to have a complete picture of the bond products offered by CertAsig, we propose the following synthetic analysis, hopefully useful for your activity and / or your clients.

 

 

CONTRACTUAL INSURANCE

Types of contractual guarantees:                 What does it cover?

                 INSURED RISKS:

WHO is it addressed to?

1. BID BOND a) The insured has withdrawn its offer during the period of its validity

b) The insured does not provide a Performance Bond

c) The insured refused to sign the contract during the validity period of the offer.

Ø  Any company that participates in public procurement/ public acquisitions (whether we are discussing the execution of works in construction or supply contracts, service agreements, etc.)
2. PERFORMANCE BOND  

Non-fulfillment by the insured or inadequate performance (in terms of quantity, quality or agreed period) of the contractual obligations, due to its fault.

Ø  Any company that signs a contract with a public authority

Ø  Sometimes in commercial contracts between two private companies

Most of the Performance Bonds are required in contractual relations with public authorities, but there are also commercial contracts between private companies that require such bond.

Examples of contracts: execution of works, concession contracts, supply of goods, providing services (ie: cleaning, security, etc), IT services, etc.

 

3. MAINTENANCE BOND (Performance Bond for fault notification period)  

 

Non-fulfillment by the insured or inadequate performance of the contractual obligations during the defects notification period (remedy of any defects / hidden deffects of the works fullfiled), due to its fault.

Ø  Any company that signs a contract with a public authority

Ø  Sometimes in commercial contracts between two private companies

Examples of such contracts: execution of works (high\ways, national roads, rehabilitation of schools and kindergartens, water treatment plants, treatment plants), IT services, etc.

 

 

4. Advance Payment Bond

Non-fulfillment by the Insured – due to its fault – or inadequate performance of the contractual obligations,  regarding the justification of the sums received as an advance through the goods delivered, executed works and services provided. Ø  Any company that signs a contract with a public authority

Ø  Sometimes in commercial contracts between two private companies

The bond is mandatory in contracts with public authorities, in cases where an advance payment is foreseen.

5. RETENTION BOND Non-fulfillment by the insured or inadequate performance (from a qualitative point of view)  of the contractual obligations, due to its fault.

 

Ø  Any company that signs a contract with a public authority

Not all contracts require retention bond (ie: contracts for the construction of highways, water treatment plants and sewerage treatment plants, etc.)

6. EUROBOND

(insurace related to the adequate use of funding / non-reimbursable funds offered as an advance payment in development / research projects))

 

Non-fulfillment by the insured – due to its fault – or inadequate fullfilment of the contractual obligations with regard to justifying the amounts received as advance payment or expenses incurred that are not eligible under the funding agreement through the goods delivered, executed works and services provided.

 

Ø  Any company wishing to obtain non-refundable EU funds in order to develop a business / project idea.

These could be small and medium-sized enterprises or experienced companies.

7. Payment Bond Non-payment – in full or in part – of the invoices / debts, relating to the delivered goods or services provided by the Beneficiary (in this case, the supplier of goods and services), due the insured’s fault. Ø  It may be required in the commercial contracts between two private companies, for which the payment of the goods / services is made at a certain date.

The product can be adapted  to cover the non-payment of rent (RENT BOND).

 

NON-CONTRACTUAL INSURANCE

CUSTOMS GUARANTEES

Types of bonds:

                What does it cover?

                 INSURED RISKS:

WHO is it addressed to?

1. INDIVIDUAL CUSTOM BOND Non-payment of the customs debt and other taxes related to goods import arising from an occasional customs operation. Ø   Customs commissioners

Ø   Importers of goods from outside the EU

Ø  Owners of goods imported from outside the EU

Ø  Owners of storage facilities approved by the Customs Authority.

2. Global custom Bond Non-payment of import duties related to a customs debt and as the case may be, other taxes related to the importation of goods (eg VAT, excises) arising or potentially arising for two or more transactions, declarations or custom regimes used on a regular basis such as:

 1) Suspensive regimes:

·         Customs warehousing

·         Temporary admission

·         Release for free circulation for end-use

·         Inward processing

·         Temporary storage

·         Union/common transit
2) Simplified customs procedures:

·            Simplified customs declaration

·            Entry in the declarant’s records (local clearance)

3) Other customs operations requiring guarantee:

·            deferment of the payment of the import duty payable (article 110 of the Union Customs Code)

·            release of the goods for special situations (article 195 of the New Union Customs Code)

·            provisional anti-dumping duties.

 

Our nine-years experience in bond insurance makes us even more ambitious and that is why we aim to stay connected to the customer’s needs and the market requirements and to keep developing the product portfolio in the future.

Finally, we will remind our contact addresses:

licitatii @ certasig.ro – for Bid Bonds

garantii@certasig.ro – for any type of bond, except bid bonds

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