Insurers’ entry in surety bond biz for infra projects proposed

Big construction and infrastructure projects may soon witness the concept of surety bond as an option and alternate to bank guarantees. A Working Group of insurance regulator Irdai has already recommended issuance of surety bonds by insurance companies which will function as the performance or delivery obligation to complete an insured project.

The panel, headed by former New India Assurance Chairman G Srinivasan, has proposed that the Insurance Regulatory and Development Authority of India (Irdai) may allow insurers to enter the surety bond insurance business with solvency margin above a certain threshold as the experience of surety bond insurance is yet to develop in the Indian market and the risk exposure under this business is quite significant.