High-profile insolvencies highlight role of surety bonds -- IUA

High-profile insolvencies are bringing the role of surety bonds into focus, according to the International Underwriting Association. The appointment of administrators by Henry Construction Projects provides one example of the protection offered under these circumstances.

Chris Jones, director of legal and market services at the IUA said: “The Henry Construction insolvency is a very large insured exposure for the surety market, but a clear example of where insurers are assisting clients to meet their obligations by providing quick and meaningful claims handling support. The economic protection offered by such cover mitigates the devastating effects that insolvencies can have on third party contractors, employees and the wider economy.”

“Surety bonds and guarantees are also an important tool for companies to maintain financial flexibility and cashflow liquidity in their day-to-day operations and help satisfy counterparties’ own security requirements in trading.”

The IUA operates a Surety Committee, made up of senior underwriters and legal counsel from across the sector. The group provides a forum to discuss technical questions, emerging risks and promotes best practices across the market.

The committee has urged UK businesses to consider the value of surety bonds and guarantees as a crucial financial implement to ensure their operations thrive and overcome times of difficulty.

Collectively, the UK's surety bond providers offer protection for insured exposures totalling hundreds of billions of pounds.

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