Nitin Gadkari, union minister for Road Transport & Highways
Though, the government and the IRDA have allowed the general insurers to launch Surety bonds since April 1, no insurers have been able to do it as there are lot of technical and legal gaps needs to be addressed.
Gadkari will also check the general insurance industry’s preparation to launch `Golden hour treatment’’ for highways accident victims
New Delhi:
Nitin Gadkari, union minister for Road Transport & Highways (MORTH), has summoned the IRDAI chairman Debasish Panda and CEOs of general insurance companies to New Delhi on Wednesday to sort out policy bottlenecks for launching surety bonds.
Gadkari will also check the general insurance industry’s preparation for launching `Golden hour treatment’’ for highways accident victims.
Though, the government and the IRDA have allowed the general insurers to launch Surety bonds since April 1, no insurers have been able to do it, as there are lot of technical and legal gaps, as demanded by the general insurers, need to be addressed.
To support for the implementation of large scale project finance, particularly in the area road projects of National Highway Authority of India(NHAI), finance minister Nirmala Sitharaman, in her Union Budget 2022-23 had said that bidders for government projects could supply surety bonds instead of bank guarantees, which are much more expensive thus improving the viability of their bid.
After the Union Budget, the IRDAI had come out with the detailed norms on the issuance of surety bonds by the general insurers.
However, the general insurance industry wanted changes in Indian Contract Act and Insolvency and Bankruptcy Code (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.
Bhargav Dasgupta, MD & CEO, ICICI Lombard General Insurance said,“ “Given surety bonds is an entirely new line of business, insurance companies would need clarity on various aspects such as pricing, the recourse available against defaulting contractors, reinsurance options and global best practices.”
“As an industry, we would urge the regulatory bodies to facilitate changes to laws such as the Indian Contract Act and the IBC and bring surety bonds on par with bank guarantees regarding recourse available to issuers. This will help the industry approach surety solutions with much more confidence, but it will be even more a viable proposition for all stakeholders,” he said.
Afterwards, TL Alamelu, the then member, Non-Life, IRDAI, had clarified that 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).
“There is a 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.” Alamelu had said.
However, nothing has happened on the government front till now and the Indian general insurers have not launched a single Surety Bond product till today.
“The fact that issues that are acting as barriers in launching Surety bonds are being addressed by Gadkari himself, shows that the government is serious about the matter and things should much faster now,” said a CEO of a general insurance company.
Golden Hour Scheme
Gadkari will also discuss with general insurers Golden Hour Scheme to Victims of Road Accidents Victims’’ as required by the amendments in Motor Vehicles Act (MV Act) 1988
Under the Scheme any injured road accident victim will be given immediate medical attention during the ‘Golden Hour’. Those severely injured will be shifted to the nearest hospital and/or to trauma care hospital as may be required by a designated agency.
According to The MV Act 1988, ‘Golden Hour’ means the time period lasting one hour following a traumatic injury during which there is highest likelihood of preventing death by providing prompt medical care.
Cash less treatment would be given to such injured road accident victim till the injured stabilizes.
The ccheme is expected to be notified by MORTH soon and also the agency that will administer the shifting of the victim and/or medical treatment at Hospital.