Surety
Bonds

An innovative financial instrument at the service of businesses

WHAT IS IT AND WHICH COMPANIES NEED IT

A Surety Bond is an innovative financing tool and a reliable way for issuing Letters of Guarantee through an insurance program. It allows businesses to guarantee through a third party the fulfillment of a variety of obligations. Almost any sale, service or agreement can be secured through the issuance of a Surety Bond. The duration of surety bonds ranges from 1 month to 8 years.

NAK Katsiberis, a pioneer in specialty insurance services, was the first to introduce Surety Bonds in the Greek market in 2017, through its strategic partnership with INTERAMERICAN (ACHMEA GROUP). Today, NAK Katsiberis is the market leader in Surety Bonds in Greece, while being a partner of all the global insurance companies that specialize in this field.

In addition, the company’s role has been crucial in the introduction of Surety Bonds at an institutional level. The company has pioneered in the change in legislation, with the amendment of article 15 of Law 4412/2016 by 4541/2018, so that Letters of Guarantee issued by insurers are also accepted by the Public Sector.

EXAMPLE

A construction company (Principal) undertakes the implementation of a contract – construction of a project – awarded to it by the Project Owner (Beneficiary). The Insurer (Guarantor) signs the insurance contract with the Principal and issues the letter of guarantee by which it undertakes, for a specific period of time and up to a clearly defined amount, to secure the Beneficiary for any loss resulting from the improper performance of his obligations underlined in the contract.

PROTECTION OF THE BENEFICIARY

When the Principal is unable to fulfill the agreed obligations, the Beneficiary notifies the Insurance Company of this inability, requesting the relevant compensation provided (forfeiture of the Guarantee). The Insurance Company shall be obliged to pay on first demand the total amount of compensation, which cannot be higher than the capital of the guarantee.

WHICH INDUSTRIES BENEFIT FROM SURETY BONDS?

SECTOR

ENERGY

SECTOR

CONSTRUCTION

SECTOR

FOOD
& BEVERAGES

SECTOR

PHARMACEUTICALS

SECTOR

TOURISM

SECTOR

PETROLEUM PRODUCTS
& CHEMICALS

ELECTRICAL

APPLIANCE
TRADE

WHY SHOULD I CHOOSE SURETY BONDS
OVER BANK GUARANTEES?

01

High and stable ratings from international rating agencies

02

No fixed or other current assets as collaterals required

03

Alternative product for liquidity support/release

04

Charges applicable only for the duration of the Surety Bond

05

Flexibility and speed

06

Ability of the beneficiary to diversify his portfolio

07

Greater risk tolerance through optional co-insurance

SURETY BONDS AT AN INTERNATIONAL LEVEL

In the international market, the issuance of Surety Bonds by insurance companies is a widespread practice. Globally, 25% of Surety Bonds are issued by insurance companies, with total guaranteed funds exceeding 900 billion euros.

In countries such as England and Italy, guarantees from Insurance Companies and Banking Institutions are evenly distributed in the market.

FORMS OF SURETY BONDS

CONTRACT
SURETY BONDS

They provide financial security and assurance that contractual obligations will be met, principally in building and construction projects.

COMMERCIAL
SURETY BONDS

They ensure the usual operating activities of Commercial Businesses, as well as the fulfillment of obligations or commitments.

MAIN TYPES OF SURETY BONDS

01

BID BOND

Secures the project owner (Beneficiary) that the bid has been submitted in good faith and that the contractor intends to enter the contract at the bid price and provide the required bond (e.g. Performance bond, Advance Payment Bond) if awarded the contract (e.g. Public or Private Sector tenders).

02

PERFORMANCE BOND

Protects the project owner (Beneficiary) from financial loss in the event that the contractor fails to comply with the terms and conditions of the contract.

03

ADVANCE PAYMENT BOND

Ensures that the advance payment given to the contractor undertaking a project will be returned to the owner of the project in case of non-completion and implementation of the contract.

04

MAINTENANCE BOND

It assures the owner of a project (Beneficiary) that the contractor (Principal) who has carried out a project is capable of performing the maintenance contract and protects him from the financial loss he will suffer in case the contractor fails to comply with the terms of the maintenance contract (e.g. Maintenance – Good Operation of Photovoltaic Parks).

05

CUSTOMS &
TAX BOND

Assures the Beneficiary (customs & tax authorities) regarding the coverage of specific Obligations of the Principal, i.e. customs duties and other charges provided for by EU and/or international legislation related to the import or export of goods.

06

PAYMENT BOND

Often used in (but not limited to) construction projects. Ensures sub – contractors and suppliers are paid for their efforts as outlined in the contract. In commercial agreements it guarantees that Beneficiaries will be paid by the Principals in accordance with the terms of their contract

SURETY BONDS: FAQ

K
L
Is there a difference between Surety Bonds and Trade Credit Insurance?
Yes, they are two different insurance solutions. Surety Bonds allow businesses to guarantee through a third party the fulfillment of a variety of obligations. Credit Insurance is a specialized insurance solution that protects businesses from losses coming from the insolvency or protracted default of their customers.
K
L
Does warranty insurance from NAK Insurance Brokers cover me internationally?

Of course. ΝΑΚ Katsiberis is a leader in the Surety Bonds market in Greece and cooperates with all major Insurers offering the specific product. The company can provide coverage locally and internationally.

Our experienced team can offer specialized insurance solutions that meet your business’s insurance needs

Find out more