April 2022 | The ICISA INSIDER
| Regional Focus
Opportunities in Indian market By Vikash Khandelwal, Chief Executive Officer at Eqaro Surety India became the youngest member of the global surety market earlier this year with the Insurance regulatory and development authority of India (IRDAI) announcing the surety insurance guidelines on the 3rd of January. The guidelines permit Indian insurance companies with a solvency margin of 1.25 times to write surety bonds to the extent of 10% of the gross written premium subject to a maximum of US$ 67 million in guarantee fees for the year. The guidelines which permit the insurance companies to write only Contract guarantees, Court & Custom bonds came into effect on the 1st of April 2022. The issuance of the guidelines by the IRDAI was followed by a change in the government’s procurement norms permitting surety bonds to be accepted as an approved security for all public infrastructure and procurement contracts.
Opportunity Amongst all the major economies globally, India has been probably the last to start accepting surety bonds for public infrastructure projects. Banks have been catering to 100% of the guarantee requirement cutting across banking lines, locking up productive collaterals and sucking out precious liquidity.
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The small and medium contractors who were the worst hit had to put up collaterals in the form of real estate to the extent of 100% of the bank guarantee limits. In addition to the collaterals, the contractors were also expected to put up margin money which could be as high as 35% of the guarantees issued.
