Surety Solutions

What is Surety?

Surety is an obligation by a financial institution (which for our purposes is an insurance company) to guarantee the contractual or commercial obligations of one party, the Principal, to another, the Beneficiary.

Surety bonds can be required under the terms of a contract, or in accordance with statutory or licencing requirements, to secure the performance of the Principal in its commercial or contractual obligations to the Beneficiary.

As illustrated below, a surety bond is a tri-partite agreement issued by an insurer, the Surety, providing monetary compensation to the Beneficiary in the event that the Principal fails to perform its contractual or commercial obligations.

A counter-indemnity is taken from the Principal (and potentially its parent company) allowing the Surety to seek reimbursement in the event the Surety has to pay a claim under the surety bond.