Debasish Panda, chairman, IRDAI

“Surety bonds play a crucial role in supporting India’s infrastructure development. By addressing the challenges and fostering collaboration, we can unlock the full potential of this valuable financial instrument. Today’s discussions have paved the way for meaningful collaboration among stakeholders, which will be instrumental in overcoming these hurdles.” said Debasish Panda, chairman, IRDAI

Mumbai: Insurance regulator IRDAI on Thursday has formed a task force comprising representatives from insurers, banks, and reinsurers to address challenges and drive the growth of the surety bond market.

The task force will focus on developing strategies for risk sharing, enhancing collaboration between banks and insurers, and fostering a conducive environment for the growth of surety bond insurance.

“Surety bonds play a crucial role in supporting India’s infrastructure development. By addressing the challenges and fostering collaboration, we can unlock the full potential of this valuable financial instrument. Today’s discussions have paved the way for meaningful collaboration among stakeholders, which will be instrumental in overcoming these hurdles.” said Debasish Panda, chairman, IRDAI, while addressing a Surety Conclave in Mumbai on Thursday.

The conclave was organised by the IRDAI and the General Insurance Council(GI Council) brought together key stakeholders from the insurance industry to discuss the progress and challenges faced by the surety bond market in India.

“The collaboration between bankers and insurers, coupled with seamless data sharing, will be key to taking surety bonds to the next level. The formation of a task force is a critical step forward in ensuring that surety bonds become a cornerstone of India’s infrastructure growth story,”said Tapan Singhel, chairman of the GI Council & MD & CEO of Bajaj Allianz General Insurance.

The discussions among the stake holders underscored the need for regulatory support and industry-wide cooperation to address issues such as the right of recovery by the Ministry of Corporate Affairs, the status of secured creditors, and the need for faster court settlements.

Other attendees also included Dinesh Khara, chairman of State Bank of India, Sunil Mehta, CEO of the Indian Banks Association(IBA), and T K Manoj Kumar, chairman, Warehousing Development and Regulatory Authority( WDRA).

Key topics discussed during the conclave included:
-Collaboration between banks and insurers: Exploring ways to enhance cooperation and
streamline processes for surety bond issuance,

– Data sharing: Discussing the importance of sharing relevant data among stakeholders to improve risk assessment and underwriting,

– Expanding the scope of surety bonds: Identifying new sectors and beneficiaries that can benefit from surety bond coverage,

While the conclave highlighted the significant potential of surety bonds to contribute to India’s infrastructure development, it also underscored several challenges that need to be addressed,

-Regulatory parity: Advocating for equal legal recourse for insurers under the Insolvency and Bankruptcy Code as enjoyed by banks,

-Enforceability of surety indemnity agreements: Seeking to strengthen the enforceability of agreements between insurers and bond beneficiaries,

-Data access and sharing: Addressing the need for timely and efficient data sharing between banks and financial institutions.

The Surety Conclave concluded with a strong commitment from all stakeholders to work towards resolving the challenges and leveraging Surety Bonds to boost India’s infrastructure development.

The conclave was attended by representatives from general insurers, reinsurers, banks, NHAI, WDRA, ONGC, HPCL, and the Electric Power Transmission Association.