Insurance
surety

This guarantees the proper fulfilment of a contract under the agreed conditions. It is generally used when a company has been awarded a contract and the Public Administration requests a guarantee for its fulfilment. In order to be eligible to tender, this guarantee replaces the prior tender guarantee and remains in force until completion of the work. This guarantee may be provided by a surety insurance policy issued by an insurance company authorised to do so by the Directorate General of Insurance. The risk in this surety insurance is due to breach of contract by the Policyholder, giving rise to a penalty or termination of the contract for causes attributable to the Policyholder. This procedure is also applied in the case of those activities that are required by the Public Administration to provide a guarantee in order to obtain an activity licence, such as in the Gambling Sector, Mining, Security, Travel Agencies, etc.

This guarantee is used when the successful bidder of a project requests that the Public Administration provide an advance payment from the awarded budget for materials. For the Public Administration to grant this, a guarantee is required. In this case surety insurance guarantees that the materials supplied to the contractor will be incorporated into the fulfilment of the contract within the terms of the contract/or the proper application of the advance payment for the works in question.

This type of guarantee protects the owner of a completed construction project for a specified period of time against defects and failures in materials, workmanship and design that might later arise if the project has been done incorrectly. It acts as an insurance policy on a construction project to ensure that a contractor corrects defects that arise, or that defects are compensated for.