The Insurance Regulatory and Development Authority of India (IRDAI) has set up a nine member working committee to look at the possibility of Indian non-life insurers offering Surety Bond to contractors.
The IRDAI has set up the committee after the Ministry of Road Transport and Highways requested it to examine the possibility of offering Surety Bond for contractors.
According to IRDAI the Ministry of Road Transport and Highways had written to it pointing out the Covid-19 pandemic and its impact on the economy, liquidity and cash flow issues faced by the Indian banking sector.
Presently the insurance laws in the country does not permit sale of such Surety Bonds by the insurers which is a financial product. The banks are offering Bank Guarantees.
The Surety Bond guarantees satisfactory completion of a project by a contractor and providing performance security to various government agencies.
The IRDAI Working Group is headed by G. Srinivasan, Director, National Insurance Academy will study the current legal and regulatory framework with reference to Surety Bond; assess the suitability of the Indian insurance sector to offer or any other sector to offer Surety Bond and justify its recommendations with special reference to legal and regulatory frame work.