Surety Bond

An insurance company may take the place of a credit institution with respect to all types of financial guarantee (besides those unrelated to a contractual obligation). Such policies enable funds blocked in connection with a financial guarantee to be freed up in favour of insurance cover.

SURETY BONDS can be subscribed by a company with respect to the provision of goods, services or any other obligation with which it is faced, whether domestically or international and whether the company is private or public.

The surety bond is therefore an agreement governing the relationship between three parties:

- the contracting party, who is required to provide a guarantee but is unable to provide full financial coverage
- the beneficiary, who receives a guarantee under the insurance policy should the contracting party be unable to meet its responsibilities
- the guarantor, being the insurance company that issues the policy as surety.

A SURETY BOND CAN AVOID THE NEED FOR A BLOCKED ACCOUNT

A surety bond can be subscribed by payment of a premium, whereas a bank may demand that funds or financial assets be blocked for the duration of any guarantee issued.

Following the same principle it is possible to obtain COVER FOR COMMERCIAL CREDIT (transfer to a third party of outstanding receivables) or COVER FOR POLITICAL RISK, necessary for companies active in foreign markets or with foreign suppliers or customers.