Irdai looks at insurers offering surety bonds

BENGALURU: After a request from the Centre, insurance regulator IRDAI has formed a working group to study feasibility of insurers offering surety bonds for large-scale construction projects and road contractors.

"Currently, surety bond for contractors is not being offered by insurance companies in the Indian market to guarantee satisfactory completion of a project by a contractor and providing performance security to various government agencies," said IRDAI in its circular.

IRDAI said its current rules and regulation don't permit underwriting of bonds that guarantee performance and bid securities as they are financial instruments and not conventional insurance products. So far only banks have been issuing bank guarantees to contractors for fulfilling contract security and performance pledges.

This comes after Union Road Transport Ministry asked the regulator to see if general insurers could offer such bonds in view of COVID-19 pandemic and the consequent economic impact on liquidity and cash flow issues in the banking sector.

The group will be headed by G Srinivasan, director, National Insurance Academy, and executives of public and private insurers.

Source: The Times of India

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