What is a Bond?
A Bond is a written promise, provided by a Surety or Guarantor, to pay the direct loss and damage suffered by the beneficiary of the Bond, as a direct result of the breach of contractual obligations of the Surety or Guarantor's client.
There may also be, in certain circumstances, an opportunity for the Surety or Guarantor to arrange completion of the contract in mitigation of the loss.
Types of Bond
We have experience in dealing with a wide range of different Bonds. These may be divided into three main areas and examples of the types of bonds available are:
Contract Bonds
- Bid or Tender Bonds
- Guarantee or Performance Bonds
- Section 38 Highways Act Bonds
- Section 18 Sewer Bonds
- Advance Payment Bonds
- Retention Monies Bonds.
Customs and Related Bonds
- VAT/Duty Deferment Bonds
- Warehouse Bonds
- Transhipment Bonds
- Carnets
- EEC Transit Guarantees.
Miscellaneous Bonds
- Intervention Board Guarantee.
This is not an exhaustive list and we would be happy to consider enquiries for other types of Bond not shown above.
Counter Indemnity
A Surety or Guarantor may seek reimbursement from its client for any claim paid under a Bond issued on the client's behalf. This is an established concept, supported by common law, which is formalised by the counter indemnification of the Surety or Guarantor by the client. Such a Counter Indemnity takes the form of a legally binding undertaking by our client, to indemnify us against any claims, costs and expenses that may arise whilst acting as Surety or Guarantor. If our client is part of a wider group of companies, then we will also require the Counter Indemnity of the ultimate holding company. Specimen copies of our Counter Indemnities are available if required.
Of course, the risk of Surety or Guarantor is that the client will be unable to make good its promise under the Counter Indemnity, most calls on Bonds taking place under circumstances where the client has become insolvent.
Underwriting Considerations
- Clients should have a turnover of at least £2 million and a net worth of at least £500,000
- Clients should have been established and trading for at least three years
- Latest fully audited accounts, and those of any ultimate holding company, must be supplied with the initial enquiry. These must not be older than 10 months from the year-end to which they relate
- Schedule of bank facilities form to be completed (see appendix to proposal form under the Forms & Documents section)
- For contract Bonds full details of the contract and the Bond wording must be supplied
- Any indication of terms from us will be subject to completion of our proposal form
- A visit by an underwriter may be required
- Insurers' fees are usually a flat charge for each Bond issued and are normally subject to a minimum of £500 on any one bond. Insurers will consider requests for facility arrangements where lower minimum fees may apply.
Please Note
This summary only provides brief details of typical cover provided under the policy. For precise policy, terms, conditions and exclusions please request a specimen policy document.
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