Union Road Transport and Highways Minister Nitin Gadkari launched India’s first ‘Surety Bond Insurance’ product from Bajaj Allianz General Insurance Company to reduce the dependence of infrastructure developers on bank guarantees .
- The product was introduced in response to the demand identified by the infrastructure sector and the Government of India (GoI).
- It will be used as an alternative to bank guarantee.
- This product launch is in line with the Government of India’s vision of enhancing infrastructure development in India to accelerate the pace of development of upcoming projects.
About Security Bonds
I. Security bond insurance is a risk transfer tool for the principal (contracting authority) and protects them from losses arising if the contractor fails to meet his contractual obligation.
ii. The insurance will provide the contract of guarantee to the product principal on contractual terms, and other business deals will be concluded according to mutually agreed terms.
- If the contractor fails to meet the terms of the contract, the principal can claim the security bond and compensate for the loss.
Unlike bank guarantees, security bond insurance does not require large collateral from the contractor, thus freeing up significant funds for the contractor, which they can use for the development of the business.
ii. This product will help reduce the debt of contractors and also facilitate the development of upcoming infrastructure projects in India.
Recent related news:
In July 2022 Bajaj Allianz General Insurance Company Limited became the first company to launch the add-on motor insurance cover, Pay as You Consume (PAYC), under the Sandbox Regulations of the Insurance Regulatory and Development Authority of India (IRDAI).
About Bajaj Allianz General Insurance Company Limited:
Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Finserv Limited and Allianz SE.
Managing Director (MD) and Chief Executive Officer (CEO) – Tapan Singhal
Headquarters – Pune, Maharashtra
Founded – 2001