Surety
bond
The best alternative to bank guarantees
Technical guarantees to the public administration for concessions, awards and tenders.
What is
surety bond?
Surety bond is insurance whereby the insurer (the company) undertakes, in the event of breach of the legal and/or contractual obligations of the policyholder (client), to indemnify the insured (beneficiary), by way of compensation or penalty, for the financial damage suffered within the limits established by law or in the contract.
What is surety bond for?
Surety bond is normally used to cover technical guarantees. Technical guarantees are understood to be when the non-fulfilment by the policyholder of legal or contractual obligations (execution of works, services, supplies, etc.) is being guaranteed. Surety bond does not cover guaranteeing payment commitments to suppliers; this type of insurance is part of the Credit Insurance branch and does not cover the guarantees requested by financial institutions for credits or loans.
Applications of Surety Bond
Royal Legislative Decree 2/2000 of 16 June 2000, which approves the revised text of Law 13/1995, of 18 May 1995, on Public Administration Contracts, specifies the types of guarantees that the Public Entity admits, including surety bond and bank guarantees.
Coverage:
Types of Surety Bond
SURETY BOND
Consult the different Surety Bonds that we have available
Every contractor who applies for a public tender, as established in the Law on Contracts with Public Administrations, needs to submit, together with their bid, a bid bond to ensure that, in the event that they are awarded the contract, they will sign the performance contract in accordance with the conditions under which they made their bid.
For those Contractors who have not been awarded the contract, the validity of this guarantee shall last until the awarding of the contract.
These guarantees may be constituted by means of a surety bond policy issued by an insurance company authorised to do so by the Directorate General of Insurance.
The loss arises in the event that the Insured Party awards the contract to the Policyholder and it is not formalised for reasons attributable to the bidder (Policyholder).
Surety bond:
the best alternative to bank guarantees
Surety bond is a guarantee that, unlike a bank guarantee, does not pledge financial resources and is not included in the CIRBE, i.e. it does not add to bank risk and this means a greater possibility of opting for other products such as loans, credit accounts, promissory note discounting, etc.
If you replace bank guarantees with surety bond, your cash flow improves and your banking risk decreases, thereby increasing your solvency.