What Are Surety Bonds?
Surety bonds are a tri-party agreement that primarily provide financial compensation to an employer in the event that a principal fails to meet their obligations within their contract with the employer.
Where Are They Used?
They are most commonly used in the construction industry where they are required under the terms of the underlying construction contract between the contractor (principal) and the beneficiary (employer).
They are required in other sectors and industries too, albeit less frequently. As an example, Tryg Trade can support HMRC/Duty Deferment Bonds. These non-industry specific bonds allow companies to delay their duty/VAT due on imported goods. This has significant positive impacts on cashflow positions and is a useful tool for any company involved with imports.
Bonds can be issued by both banks and insurance companies.
Why Use The Insurance Sector?
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Release tied up capital:
- Traditional bank issued surety bonds will generally be secured against cash or existing credit lines.
- This is not the case with insurance backed surety bonds, resulting in the freeing up of working capital and the diversification of a company’s credit options.
- For entities looking to alleviate shrinking margins along with increased competition for projects, sureties from the insurance sector can provide a cost effective alternative bonding source.
Competitive pricing:
- With often lower base rates and no utilisation or line fees, insurance backed surety bonds can offer a cheaper alternative to surety bonds provided by the banking sector.
- With banks offering the full variety of financial products and the insurance market focusing on surety, often the insurance sector can provide more specific and cost effective solutions given the expertise and focus on the product.
Improved capacity:
- Increasing a client’s available capacity and facilities from the insurance market assists with securing new projects, contributing to the growth and profitability of the company.
We Are Specialised In Bonds And Guarantees
Tryg Trade has an outstanding experience in the field of surety bonds.
Tryg Trade is the largest Surety and Trade Credit insurance supplier in the Nordics and we can help you both locally and across borders. If you have business units in various countries and you need to issue bonds in these countries, we can offer to establish a facility, which covers all countries and all business units in your group.
Read more about our products and POMnet, which is our flexible online solution offering you a full overview of your portfolio at any time
Do You Want To Know More?
If you want to know more about our solutions, call us at 0203 770 5540 or contact us through our contact form.