A working group formed by the IRDAI* has recommended that insurers issue surety bonds as an alternative to bank guarantees for large construction and infrastructure projects.
* Insurance Regulatory and Development Authority of India
The panel, headed by former New India Assurance Chairman G Srinivasan, says that the IRDAI could allow insurers that meet a certain solvency margin above the current threshold to offer surety insurance. This line of business is yet to develop in the Indian market and the risk exposure under this business is quite significant, according to a report by Indian Express.
The performance bonds issued may cover up to 10-20% or sometimes 100% of the project value, the panel has proposed.
The issue of surety insurance has been discussed for several years now.