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NHAI Reports ₹3,000 Crore in Insurance Surety Bonds Issued by Insurers

by Celia

Insurance companies have issued approximately 700 insurance surety bonds valued at around ₹3,000 crore following the government’s decision to elevate this instrument to the status of bank guarantees for all government procurements.

Details of this development were disclosed during a workshop on the implementation of insurance surety bonds in national highway contracts, which was conducted by the National Highways Authority of India (NHAI) in New Delhi.

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NHAI has received a total of 164 insurance surety bonds, comprising 20 bonds for performance security and 144 for bid securities. According to a release by the Ministry of Road Transport and Highways on Wednesday, contractors are being encouraged to utilize these bonds as an alternative means of submitting bid security and/or performance security.

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Insurance surety bonds represent a financial arrangement wherein insurance companies serve as ‘sureties,’ offering a financial guarantee that contractors will fulfill their obligations as per the agreed terms. The Ministry emphasized that broader adoption of such instruments will bolster infrastructure development in the country.

In a noteworthy development from November 2023, NHAI announced its acceptance of an insurance surety bond for the first time, as part of the monetization program for an upcoming Toll Operate Transfer (TOT) package bid. NHAI highlighted this milestone as the innovative use of this instrument as a bank guarantee in the road infrastructure sector to facilitate bid monetization efforts.

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