Bond and Financial Guarantee Insurance
Financial Guarantee bonds
This category of surety bonds ensures the principal (bonded party) will pay to the oblige (usually a government agency). The term “financial guarantee” is used by surety underwriters to assign additional risk to surety bonds that contain some form of the payment obligation. It is important to note that surety bonds guaranteeing principal and interest payments on a loan are a separate category known as “financial guaranty.
Insurance Bond
Banks have traditionally provided bonds. A bond is not an insurance policy in and of itself but rather a type of financial guarantee. It is a guarantee given by one party (the surety or guarantor) to another (the person requesting the bond) that a third party (the person/company requesting the bond) will fulfil its contractual obligations.
We have several types of insurance bonds that are common in the Nigerian insurance industry, including but not limited to the following:
This policy binds the insurer as surety that the physical work specified in the contract agreement is completed by the contractor under specifications and within the time frame specified. The surety pays damages if the contractor fails to perform or complete the contract according to specifications.
This bond is typically affected by a contractor prior to the principal making any advance payment to him, either as a mobilisation fee or as an advance payment of the contract value at various stages of the contract works. It guarantees that the amount advanced is used for its intended purpose or that it will be refunded if not. The amount recoverable is the difference between the advance and the contract work already completed, plus the value of materials already supplied.
Purpose or that it will be refunded if not. The amount recoverable is the difference between the advance.
An insurance company issues a counter indemnity or guarantee to a bank or another insurance company. It protects the bank/insurance company from the client’s failure to perform. The bank/insurance company transfers the risk to an insurance company responsible for compensating the bank/insurance company in the event of a default.
An insurance company issues a counter indemnity or guarantee to a bank or another insurance company. It protects the bank/insurance company from the client’s failure to perform. The bank/insurance company transfers the risk to an insurance company responsible for compensating the bank/insurance company in the event of a default.
Credit bond insurance A credit bond is an agreement or a commitment made by a surety (Insurance Company) jointly with its client, usually a contractor (debtor), to be answerable for the discharge of the client’s obligations to a third party, usually the Employer/Supplier (creditor). The surety and debtor usually act as co-sureties as both agree to be jointly responsible for discharging the debtor’s financial obligations to the creditor.
