New India Assurance entered the surety bond industry

New India Assurance, the country’s largest non-life insurance company, on Friday announced the commencement of Surety Bond business. State-owned New India Assurance has become the second insurance company in the country to offer such a bond. Bajaj Alliance General Insurance, a private sector general insurer, had launched India’s first surety bond insurance in December last year. Insurance regulator IRDAI has allowed general insurers to issue security insurance bonds from April 2022.

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Surety bonds will soon revolutionize the dynamics of India’s infrastructure industry. Surety bond insurance acts as a safety net for infrastructure projects and protects the interests of the contractor and the policyholder. In today’s increasingly uncertain and volatile business environment, surety bonds provide financial assurance to all parties involved in infrastructure projects. Commenting on the new surety bond launch, Neerja Kapoor, Chairman and Managing Director, New India Assurance Co said. The company wants to grow in the surety insurance business in India and is gearing up for it, she added.

Surety bonds are legally enforceable tripartite contracts. It guarantees better payment, performance and flexibility. In case of default in the execution of a project, the insurance company provides an underwriting guarantee for the premium. The party responsible for project or service delivery – the principal – delivers the claim in a timely manner by complying with specified conditions.

The guarantor assures the policyholder that the guarantor will take responsibility for timely payments. If the principal defaults, the surety insurer will indemnify the obligee. According to New India Assurance Company, surety bonds are a useful tool for small businesses, as the collateral requirements of insurance companies are lower than bank guarantees. Surety bonds can enable smaller infrastructure developers to compete with larger, more established companies for large contracts.

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A surety is a company that provides a line of credit to guarantee the payment of any claim. They provide financial guarantee to the principal obligee. A principal’s duties may be to comply with state laws and regulations related to a specific business license or to comply with the terms of a construction contract. Suretyship is the guarantee of one party for the debts of another party. This is intended to reduce risk for the lender, which in turn lowers the interest rate for the borrower.

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