Our Contract Bonds
As a contractor, providing security can tie up your assets or interfere with your credit lines. Contract Bonds are the ideal solution. They can help you secure your performance and other contract-related obligations without having to provide tangible or collateral security. This can free up your working capital, enhance your liquidity and allow you to take on new projects.
- Performance Bonds provide security for your client against default or non-performance
- Maintenance Bonds cover your post-completion obligations during the warranty or latent defects period, usually 12 months from practical completion
- Advance Payment Bonds cover your client when they advance you money to pre-purchase equipment or establish a site
- Retention Release Bonds provide security for your client when they advance you money from their retention fund
- Bid Bonds are submitted with your bid or tender to ensure you’ll enter into a contract if your bid is accepted. They also guarantee a Performance Bond will be supplied
Our bonds are widely accepted by governments, large corporations and private companies. We have an S&P rating of A+ and meet the requirements of APRA, the governing body that monitors the insurance sector.
Contact us to talk about how we can meet your needs; email firstname.lastname@example.org
Frequently Asked Questions
Surety bonds provide protection for the Principal of a contract (the Beneficiary) against the default of the Contractor. It’s an undertaking by an independent third party, “the Surety” (QBE), to the owner that you’ll meet the terms and conditions of the contract. So a surety bond involves three different parties. As a contractor, you request and pay the premium for the surety bond, however your client is the beneficiary.
Surety bonds are irrevocable instruments payable upon demand. They are unsecured and as such we undertake a detailed underwriting assessment before establishing your facility limit. We seldom provide one-off bonds but rather establish a facility that you can draw down on when needed.
A surety bond is very similar to a bank guarantee with the exception that it’s underwritten by an insurance company. Our recourse is through a Deed of Indemnity that is executed once the facility is established. The Deed of Indemnity is our recovery document and in the unlikely event of a claim occurring, we’ll seek recourse through our client (you).
The need to provide guarantees to secure performance and other security requirements can be a major obstacle for contractors tendering for projects. In many cases, they’ve pledged all available security to a financial institution and may have reached capacity within its agreed facility limit. As surety bonds are generally unsecured they can enhance your working capital and liquidity position without the need to provide tangible security.
The advantages of a surety bond facility can be easily demonstrated using the example of a contractor with a net worth of $3 million winning a contract for $30 million and being required to lodge a bond for $3 million (10% of the contract value). Traditionally, a financial institution would require the contractor to either place at least $3 million on deposit or effect a mortgage/debenture over assets of similar value. As surety bonds are generally unsecured, the contractors’ assets remain unencumbered and working capital is released to fund future contracts.
Our bonds are widely accepted by Federal, State and Local governments as well as large publicly traded companies and private enterprises.
A Deed of Indemnity and Guarantee is our recourse document in the unlikely event of a claim. The security involved will depend on the individual circumstances of your company.
Our analysts look for specific qualities:
- A track record of delivering projects successfully
- A well-developed core business
- A solid track record of recording a profit over the last few years
- Evidence of professional control and management of company operations
- Adequate liquidity necessary to support the business
- A policy of capital growth and retention within the company
- Technical ability to successfully undertake the specific contracts for which contract bonds are required
- Well-managed exposure to existing projects.
The only cost involved is a fee for the establishment of the Deed of Indemnity and Guarantee.
Yes. The premium is payable upfront before we issue the bond.
It depends on the specifics of your application, including the bond value, the bond rate and the duration of the bond.
Seven years, although we’re able to gain special acceptance from our reinsurers to go beyond this period in certain situations.
Once your facility has been established a bond can be issued and delivered within 24-48 hours of receipt of your application.
We’ll pay brokerage, however the amount will depend on the volume of business and level of involvement of your broker.
Should we deal with you directly then no brokerage is payable.