Surety Bonds Market Struggles To Kick Off
The government's ambitious plan to introduce the Surety Insurance Bonds market as an alternative to bank guarantees in infrastructure projects has faced significant challenges and has not made progress over the past three years due to technical and financial obstacles.
Since the launch of two basic level Surety Bonds (Bid Bonds) by Union Minister Nitin Gadkari in December 2022, the Surety Bond market in India has remained stagnant, according to insurance sources.
Despite announcements from prominent general insurers like New India Assurance, ICICI Lombard General Insurance, SBI General Insurance, and Bajaj Allianz General Insurance about their intentions to issue Surety Bonds in recent months, none have been able to do so due to the absence of necessary supporting elements.
"It has taken almost three years to obtain IRDAI's approvals for the Surety Bond product. We have addressed numerous technicalities that would reduce the risk associated with road construction projects, making Surety Bonds an attractive and profitable venture for insurers. Surety Bonds will also enable contractors to secure financial closure for their projects without relying solely on bank guarantees," Gadkari had stated when launching the initial two Surety Bond products last year.
