Suretyship insurance

What is it?

The suretyship insurance covers damages for the persons who have suffered losses due to failure to perform the contractual obligations of the insured person or due to improper execution of construction, goods and provision of services contracts.

There are the following types of suretyship insurance:

• Bid bonds. The object of this insurance is the obligation of the insured to fulfill the proposals submitted to the customer regarding the public tender;
• Performance bonds. The object of this insurance is the obligation of the insured to fulfill his obligations to the customer in accordance with the terms of the contract;
• Advanced payment bonds. The object of this insurance is the assurance of the insured’s obligation for advance payments as provided for in the contract;
• Warranty bonds. The object of this insurance is the assurance of the insured’s obligations in accordance with the contract concluded with the customer (for example, correction of the contract work defects, arising from the fault of the contractor during the warranty period).

What are the possible insurance events?

In case of bid bonds:

• Withdrawal of the insured’s tender within the period of validity indicated in the conditions of the tender;
• Avoiding or refusing the insured to sign a contract in accordance with the terms of the tender and instructions to the tenderers, when the beneficiary accepts the insured’s tender within the period of validity specified in the conditions of the tender;
• The avoidance or refusal of the insured to submit a performance according to the terms of the tender, when the beneficiary accepts the insured‘s tender within the period of validity specified in the conditions of the tender;
• The insured’s disagreement with the tender‘s price correction under the terms of the tender, when the beneficiary accepts the insured‘s tender within the period of validity specified in the conditions of the tender.

In case of performance bonds:

• Works performed or services rendered by the insured, the goods presented are not in conformity with the requirements specified in the agreement;
• Violation of the terms of performance of obligations established by the insured’s contract except for cases when these terms were violated not due to the fault of the insured;
• Unlawful refusal to continue to fulfill the contractual obligations guaranteed by the insurance contract.

In the case of advanced payment bonds:

In the event of advanced payment bonds, the insured event is considered to be the advance payment paid to the insured and not returned to the beneficiary on the basis of the contract due to the fact that it was used for non-contractual purposes.

In the case of warranty bonds:

In the event of warranty bonds, the insured event is deemed to be the failure of the insured to perform his obligations for the warranty period provided for in the contract.