Entrepreneurs that undertake public projects know very well that, on the one hand, Letters of Guarantee are vital for a smooth operation, while on the other hand, how much of a problem is the exclusive issuance of them by banks.
The Insurance Industry offers a solution to this problem with the Letters of Guarantee issuance, which are no longer the exclusive privilege of banks, as they can be issued by insurance companies as well, while SoEasy Insurance has been providing this specific product in Cyprus and Greece for some years now, relieving a lot of entrepreneurs.
How do Letters of Guarantee work through an Insurance Company?
The solution to the Letters of Guarantee problem is provided by Guarantee Insurance, or as they are also known, Surety Bonds. Guarantee Insurance is a type of insurance, through which the Insurance Company undertakes the obligation to pay the beneficiary, in case the insured/principal fails to do so.
The insurance company offers coverage as a guarantor, if the principal, i.e. the insurance company customer, does not fulfil the contract terms. Then the insurance company, at the request of the beneficiary, i.e. the owner of the project, will pay the guarantee.
Guarantee Insurance is a rapidly growing industry worldwide, its premiums reached $17.2 billion in 2022 and by 2029, they are expected to exceed $25 billion.
Guarantee Insurance Advantages
The Letters of Guarantee issuance by an Insurance Company offers a variety of advantages to businesses, participating in tenders and undertaking projects.
The most important advantage is the business’ independence from the banks, allowing them to avoid their capital commitment, or the use of mortgages, since this was the only practice until recently. In this way, businesses have a bigger working capital and liquidity, to easily manage their needs.
Another advantage of the company’s enhanced liquidity is that they can participate in more tenders, without withholding their assets. Therefore, the company can claim more tenders, which means more project assignments that will increase their revenue and profitability.
Letters of Guarantee types
In the global market, there is a variety of surety bonds, designed for different purposes. Letters of Guarantee fall into two main categories:
Contracts Guarantee
Contract Guarantees ensure the Principal’s Contractual Obligations fulfilment and they are usually used in the public and private construction industry, or in material supply agreements. This type of surety bonds represents approximately 66% of the international guarantee market.
Trade or Non-Contractual Guarantee
Trade Guarantees, or non-contractual guarantees, ensure the legal or regulatory obligations fulfilment. Some types in this surety bonds category are Tax and Customs duty guarantee, or Producer Certificate, which is used in Photovoltaic and Wind parks.
Guarantee Letters from SoEasy Insurance through international companies
Loyal to the strategy of providing an expanded variety of products to businesses, SoEasy Insurance offers Guarantee Insurance in Cyprus and Greece for a few years now.
As we mentioned above, Guarantee Insurance is a specialized product that facilitates businesses operation that need surety bonds.
SoEasy Insurance, always in collaboration with international insurance companies with high credibility, offers to their customers the most reliable solutions regarding Letters of Guarantee.
The company is cooperating with Cyprus-based KLLP Insurance and Reinsurance Company, rated BB+ by Standard & Poor’s and with AAA capital adequacy, since the company has more than 200 million dollars in Equity.
Keeping always in mind expanding the options the customers have, SoEasy Insurance cooperates with Axeria, a member of the Arch Insurance group. Axeria has an A- rating from AM Best.
Through its cooperation with these leading Insurance Organizations and always utilizing both the training and the experiences of the executives, SoEasy Insurance is able to examine each business Letter of Guarantee needs, contributing to a healthy development and protecting their wellness.
For more details, those who are interested may contact the company at info@soeasyinsurance.com.cy or through an insurance intermediary from our company’s network.