Bonds & Sureties
We work closely with UK-based insurance bond underwriters to deliver to the exact requirements of our commercial clients.
Essentially a bond is a loan, but in the form of a security. Bonds come in many forms. Construction guarantee bonds and performance bonds are common in the construction and service industries and effectively protect an employer against loss or damage sustained as a result of a contractor or supplier failing to perform to their contractual obligations.
Other types of bond include:
- advance payment bonds: a security for funds advanced at the start of a contract (for example, for the purchase of materials, etc.)
- bid bonds: a guarantee of serious intent by a party bidding for a contract. A bid bond will be called if a bidder fails to proceed with the work having been awarded the contract
- deferred payment bonds: used in property purchase to cover the deferment of purchase price payment or rent
- recourse bonds: given in support of exporters who have recourse liability to the likes of a government export credit agency
- restoration bonds: given where contractors are working in sensitive environments and are obliged to restore the said environment prior to leaving site
- retention monies bonds: given in lieu of an employer making deductions or retentions from stage payments under a contract
A surety is similar to a guaranty in that the surety represents responsibility to a debt. A surety bond is a contract between three parties:
- the principal: the primary party who will be performing a contractual obligation
- the oblige: the recipient of the obligation (in effect, the “customer”)
- the surety: the party that ensures that the principal’s obligations are performed
As the principal, a client will pay a premium in exchange for the surety bonding company’s financial strength, in order to extend surety credit. In the event of a claim, the surety will investigate and if the claim turns out to be a valid, the surety will pay it and then turn to the principal for reimbursement of the amount paid on the claim and any legal fees incurred.