IFFCO-Tokio Enters Surety Bonds Business
IFFCO-Tokio General Insurance has entered the surety bonds business to support the infrastructure sector in India. The company joins a handful of insurers offering surety bonds, including New India Assurance, ICICI Lombard General Insurance, and others. Surety bonds are legally enforceable tripartite contracts that mitigate risks associated with infrastructure projects.
“Surety bonds provide solutions to many issues faced by the infrastructure sector,” said Subrata Mondal, Managing Director and CEO of IFFCO-Tokio. “They help widen the contractors’ pool for government departments and PSUs/PSEs, and enlarge the project-taking capacity of infrastructure companies, especially small and medium-sized contractors.”
The construction industry has already offered bank guarantees worth Rs 1.70 trillion, with this figure projected to grow to Rs 3 trillion by 2030. The insurance regulator permitted general insurers to issue surety insurance bonds in April 2022, with Bajaj Allianz General Insurance being the first to launch the product.
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Despite the potential, the issuance of surety bonds remains muted due to challenges such as collaboration between banks and insurance companies, data sharing, and regulatory parity. The insurance regulator has formed a task force to address these challenges and drive growth in the segment.
