Guarantee insurance – when you are asked to provide security for contractual obligations
When you enter into a contract for a new project, you will often be asked to provide a guarantee in favour of your client. In such cases, you will need guarantee insurance.
What is guarantee insurance?
Guarantee insurance is used as security for the performance of a piece of work, which has been agreed upon in a contract. It is also used as security for advance payments or payments on account for services agreed upon in a contract.
Where do you use guarantee insurance??
Guarantee insurance is well-known especially in the construction and manufacturing sector. Depending on the projects, you have various types of guarantees.
It may be in the construction sector, where a contractor must provide a guarantee in favour of the owner. Or where a subcontractor must provide a guarantee in favour of the turnkey contractor.
Or it may in the manufacturing sector, where a supplier must provide a guarantee in favour of the buyer.
In both cases, the guarantee secures that the work is completed in accordance with the contractual terms. And if not, that you are consequently compensated for the possible loss.
Guarantees in the construction sector
A Performance bond protects the owner from losses, if the contractor fails to fulfil his contractual obligations. The owner will be paid the amount covered under the bond and can use it to have the work completed.
If the work has been completed and defects are found during the maintenance period, the owner can call the bond. The amount covered under the bond can be used to remedy the defects. There are several industry standards available depending on which country you need the guarantee to be issued.
Payment or advance payment bonds are also seen in connection with construction projects. Payment bonds secure that the contractor pays his suppliers according to the contract. Advance payment bonds secures refund of advance payments, should the supplier not fulfil his obligations according to the contract
Guarantees in the manufacturing sector
Guarantee insurance is also seen in connection with deliveries from industrial enterprises, where the buyer wants to secure compensation for advance payments made to a supplier. If the supplier does not fulfil the contract by delivering the agreed materials, the bond can be called. In such cases, especially advance payment bonds are used.
We are specialised in bonds and guarantees
Tryg Garanti has an outstanding experience in the field of bonds and guarantees. We are specialised in bonds and guarantees for the construction and manufacturing sector and have a long-standing experience.
Tryg Garanti is the largest guarantee 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 guarantee facility, which covers all countries and all business units in your group.
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Do you want to know more?
If you want to know more about our solutions, call us at +45 44 20 39 00 or contact us thorugh our contact form.