Historically many companies have approached banks when requiring a bond. A bond is not a policy of insurance but is in effect a form of financial guarantee. It is a guarantee by one party (the surety or guarantor) to another party (the body requesting the bond) that a third party (the company requiring the bond) will meet its contractual obligations. Increasingly insurance companies are providing bonds, with two distinct advantages over the banks:
A fee is charged for providing the bond and counter indemnities are generally required from the applicant company and / or its ultimate holding / parent company. In certain circumstances, counter indemnities may also be required from shareholding directors in their personal capacity. A counter indemnity is in many respects a written formalization of an existing common law right. If a company for whom a guarantee is provided fails in its obligation to perform and this gives rise to a call on the bond, surety or a guarantor can claim reimbursement from the company. | ||
TYPES OF BONDS OFFERED AT EFU | ||
bond
Saturday, August 29, 2009
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