TL Almelu, member, Non-Life, Irdai
”A huge market is available for surety bonds in-country and now, the onus is on the insurance fraternity to come out with products quickly. We have already initiated at authority level discussions with the insurance agencies and companies,” National Highways Authority of India (NHAI) member Manoj Kumar said
New Delhi:
The insurance regulator IRDA has said in the matter of surety bonds and recovery recourse available to insurers, the government is willing to treat insurers at par with banks within the frame work of Insolvency and Bankruptcy Code (IBC).
“ Irdai has taken up the issue of insurers being treated at par with banks and the government has reacted positively to the concerns of the industry, said TL Almelu, member, Non-Life, Irdai at a seminar organised by National Insurance Academy on Thursday.
“Recently we had come with surety bond guidelines for which there is huge demand. However, we do understand the concerns raised by the insurers that they should have a recourse to recovery on par with the banks. This aspect has been taken up with the government and I can tell you that they have reacted extremely positively on the issue of trying to keep insurers at par with banks in the IBC code.”
The general insurance industry wants changes in Indian Contract Act and IBC so that surety bonds can be at par with bank guarantees when it comes to recourse available to them in case of a default.
The IRDAI earlier had issued guidelines so that insurers can start surety bond business from April 1.
Meanwhile,National Highways Authority of India (NHAI) member Manoj Kumar on Thursday said a huge market is available for surety bonds in the country and now, the onus is on the insurance fraternity to come out with products quickly.
Addressing an event organised by industry body Assocham, Kumar further said the NHAI is working to expand the construction market because ”as a country, we had a certain level of construction capability in a strategic manner by having contracts of various sizes”.
”A huge market is available for surety bonds in-country and now, the onus is on the insurance fraternity to come out with products quickly. We have already initiated at authority level discussions with the insurance agencies and companies,” he said.
The member (project) noted that it is important for the industry to come out with the right kind of insurance products.
He pointed out that three years ago, the country had 6-7 players who were doing public-private partnership (PPP) and hybrid annuity model (HAM) projects.
”Today, in the current financial year, we have 25 players. We are now awarding nearly 50 per cent contracts to new players, which in turn has resulted in competitive bids and faster constructions,” Kumar said.
He, however, added that it poses another challenge as new players often find it difficult to get bank guarantees and that’s where the roles of surety bonds come in.
Surety bonds are different from corporate bonds and financial guarantees.
While surety bonds refer to the obligation to complete the insured project, the corporate bonds refer to financial obligation to repay the debts or loans.
Kumar said surety bonds can help in the infra development of the country.
He said NHAI has been working with the Insurance Regulatory and Development Authority of India for the past two years and finally the surety bonds guidelines are in place.