Currently, Surety Bondfor contractors is not being offered by insurance companies in the IndianMarket to guarantee satisfactory completion of a project by a contractor andproviding performance security to various government agencies. The insurancelegal/ regulatory framework does not permit underwriting of Bonds thatguarantee performance and bid securities as they are financial instruments andnot conventional insurance products. Hitherto, the Banks have been issuing BankGuarantees to contractors for fulfilling contract security and performancepledges.
2. Due to the COVID 19pandemic and consequent economic impact on liquidity and cash flow issues inthe Indian Banking sector, the Ministry of Road Transport and Highways (MORTH),Government of India, has requested to examine possible offering of Surety Bond by thegeneral insurance companies.
3. To examine the matterin detail, it has been decided to constitute the following Working Group.
- Shri. G. Srinivasan,Director, National Insurance Academy, Chair
- Smt. D. Nagalakshmi,General Manager, United India Insurance Co. Ltd, Member
- Shri. Roopam Asthana,CEO, Liberty General Insurance Ltd, Member
- Shri. Neelesh Garg, CEO, Tata AIG General Insurance Co.Ltd, Member
- Shri. Hitesh Kotak,CEO, Munich Re, India, Member
- Shri. Shankar Garigiparthy, CEO, Lloyd’s India, Member
- Shri. S. N. Jayasimhan, GeneralManager, Investment Department, IRDAI, Member
- Shri. C. SrinivasaKumar, Deputy General Manager, Actuarial Department, IRDAI, Member
- Shri. K. Mahipal Reddy,General Manager, Non-Life Department, IRDAI, Member-Convener
4. The Terms of Referenceof the Working Group are as follows.
- To study the currentIndian legal and regulatory framework with reference to Surety Bonds.
- To assessthe suitability of the Indian Insurance Industry or any other sector to offerSurety Bonds.
- To providejustification for the recommendations being made by the group, with specialreference to the legal and regulatory perspective.
- Any other matterrelevant to the subject.
5. The Working Group mayhave its meetings through online mode in viewof COVID-19 pandemic and make its recommendations within three months of the date of this Order.
ChiefGeneral Manager (NL)