Surety & Counter Bank Guarantee

What is Surety?

Surety is a contract between three or more parties: a supplier of some kind, their client and an insurance company. It is a financial arrangement where the insurer provides 'Financial Bridging' between you and your client. 

Surety bonds guarantee that suppliers can meet financial obligations when contracted performance targets are missed. Many major projects are impossible without them. Howden consultants take the stress out of the entire process, from successfully aligning with the terms of contract, to managing the claims process and advocating for you.  

While technically not insurance, the insurance markets are the main source of flexible, cost-effective surety bonds. Bank-offered guarantees demand 100% collateral upfront, requiring clients to pay the full contracted guarantee amount before a project can be covered. Surety, or a Counter Bank Guarantee, requires a much smaller percentage as collateral. So you get the same protection, and still have funds to run other projects at the same time.

Bonds can apply to any supplier/client contract, but are most common in the construction and real estate sectors.

The three parties involved in the contract are:

  1. The Principal (bond holder)
  2. The Obligee (bond holder’s client)
  3. The Surety (the insurance company).

It is the Howden risk consultant’s job to make sure the wording of the surety tightly meets the performance requirements laid out in the contract – and ensure a timely turnaround of all required actions.

A surety bond is not an insurance policy; the surety will seek to reclaim the funds, plus any legal fees, from the principal.

The principal will pay a premium (once for the whole contract period) in exchange for the bonding company's financial strength to extend surety credit.

Types of Surety bond

Common type of bonds are: 

  • Bid/Tender Bond – to provide security against a contractors’ inability or unwillingness to proceed with an awarded contract.
  • Advance Payment Bond – to secure funds that have been advanced to a contractor for the pre-purchase of materials or the early mobilisation of plant and equipment under a contract. 
  • Performance Bond – to provide protection against non-performance of the conditions of contract, or security against abandoning the contract.
  • Surety Bond – to guarantee the debts, obligations or conduct of a contractor or seller involved in a construction, manufacturing or trade contract.
  • Customs Bond – to guarantee compliance with customs requirements and regulations in respect of imports/exports.
  • License Bond – lodged with regulatory/licensing authorities to provide consumer protection for the services of the licensee company (i.e. it will provide potential reimbursement to a prejudiced consumer in the event of the licensees’ default under the conditions of the license).

How are premiums worked out?

Premiums are assessed according to:

  • The requirements found in the contract, service agreement, purchase order, notice to proceed etc.
  • The financial health of the principal (solvency must be verified)
  • The loss/claims history of the principal.
  • The total sum that the surety could potentially be liable for, in the event that the principle defaults on the obligations.

Howden work with you to ensure your business is presented in the best possible light, in order to secure the most favourable terms. 

What happens in the event of a claim?

  • In the event of a default, the surety will investigate.
  • If the claim is valid, the surety will pay the obligee what they are due.
  • The surety then looks to the principal, seeking reimbursement for the amount paid (plus any legal fees).
  • In cases where the principal is blaming a third party for causing the default, the surety will investigate and have a right on subrogation. In this way, they can ‘step into the shoes’ of the principal and seek to recover damages to recover their losses. 

Do surety bonds function like traditional insurance policies?

A surety bond is not a typical insurance policy. While the surety backs the performance of the principal and will pay the penalties resulting from non-performance or under-performance, they do seek to reclaim the funds from the principal. That is why it is called 'Financial Bridging' from you to your client.

A surety bond helps make the deal happen, obligees can enter into a contract knowing that performance is guaranteed or the penalties will definitely be paid. 

What happens in a dispute?

The surety is not usually best placed to resolve legal disputes between the principal and the obligee. Sometimes, they will try to mediate disagreements before they formally become disputes and breaches of contract. Ultimately, everyone involved in the deal wants to avoid that.  

In the event of a dispute, Howden’s claims advocacy service will help you present your case to the insurer in the best possible light. As we know what they are looking for, and we can help fight your corner.

Meet the team

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Firman Amersyah

Senior Vice President
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Firman Amersyah

Senior Vice President

Firman joined Howden in December 2013 as Assistant Vice President in the Strategic Business Development. He is responsible to develop the business strategically across the company. Part of his responsibility is to develop initiatives towards clients.

Prior to joining Howden, Firman worked at Aon as Manager at Corporate Risks Services Division, where handle various major clients as well as Lippo group business. Part of his focus is also to develop affinity initiatives with corporate risks services. Previously, he also worked for JLT to handle corporate and industrial clients for 4 years and prior to that he was working for one of the major bank in Bandung, Panin Bank as internal auditor. He has more than 7 years experience.

Firman graduated from Bina Nusantara University, majoring in computerized accounting. He has just completed one of the professional qualifications from ANZIIF, CIP, Ahli Pialang Asuransi dan Reasuransi Indonesia (APAI) and Certified Indonesian Insurance & Reinsurance Broker (CIIB).

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Subur Christianto

Senior Vice President
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Subur Christianto

Senior Vice President

Subur joined Howden September 2012. Subur leads Financial Risks, Small Medium Enterprise and Affinity Risks division, as Assistant Vice President. Part of his responsibilty in SME, Affinity is to handle large chain-business risks like chain-shops, warehouses, restaurants as well as motor fleet risks. Subur is one of the key initiator to develop online based insurance facility which beneficial to our clients.

He is also responsible to develop specialty financial risks to adopt the group expertise and deploy to local business focus, such as Directors & Officers, Professional Indemnity, Trade Credit risks and the like.

Prior to joining Howden, Subur was working for JLT to focus on corporate and energy risk where handle major and complex risks clients. Previously also he worked for a Japanese insurance company, MSIG Insurance, focusing on small and medium enterprise. He has more than 7 years experience.

Area of expertise includes property insurance, motor vehicles insurance and various insurances for small and medium enterprise.

Subur graduated from Universitas Brawijaya with Finance major. He also holds from the same university a master degree in Corporate Finance. He holds professional qualification Ahli Pialang Asuransi dan Reasuransi Indonesia (APAI) and Certified Indonesian Insurance & Reinsurance Broker (CIIB).

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Gilang Sunaryuniarto

Assistant Vice President
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Gilang Sunaryuniarto

Assistant Vice President

Gilang joined Howden in April 2015 as Account Executive in Financial SME & Affinity Risks Division. Having been promoted in January 2019 as Business Manager, he was given a new role to lead Financial Specialty Risks & JBI . He is responsible for client servicing in Financial Specialty Risks area and making sure to meet our client expectation.

Prior to joining Howden, Gilang worked with PT. Asuransi Jasa Indonesia (Persero) for 5 years as marketing.

Gilang completed his bachelor's degree of Sociology Program at Faculty of Social & Political Sciences in University of Indonesia. He also holds professional qualification Ahli Pialang Asuransi dan Reassurance Indonesia (APAI) and Certified Indonesian Insurance & Reinsurance Broker (CIIB). Gilang also qualified at Level 5 for professional Insurance Broker certification based on Indonesian regulation.

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