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Surety

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Surety guarantees, including bank-fronted solutions, are widely used to support contracts and fulfill financial obligations across industries. They help businesses preserve cash flow and bank credit capacity, often delivering significant cost savings compared to traditional bank letters of credit.

At Marsh, our global team of surety specialists assists contractors, owners, and developers in designing and implementing surety strategies that release credit capacity and mitigate financial risks.

With our deep industry experience, we develop customised surety solutions across diverse industries and geographies. We explore tailored solutions based to support your company’s growth.

Surety solutions for contractors

Construction and engineering companies frequently need to provide surety guarantees and other third-party guarantees to assure clients that contractual obligations will be met. The ability to provide these bonds and guarantees can be a critical advantage during the bidding process, and failure to provide bonds can potentially result in disqualification.

Marsh’s Surety practice combines deep expertise and strong relationships across global insurance markets to meet your bonding needs.

Our capabilities cover a range of surety guarantees, including: 

  1. Performance bonds.
  2. Advance payment guarantees.
  3. Retention bonds.
  4. Maintenance bonds.
  5. Bid/tender bonds.

Surety guarantees for owners and developers

Surety guarantees provide owners and developers with greater financial security and confidence in their construction projects. Acting as a risk transfer mechanism, surety assures that contractors will perform their contractual obligations in accordance with project documents.

This risk transfer protects owners and developers from potential financial losses due to contractor default or project non-completion. Consequently, many owners require surety guarantees from contractors as a safeguard.

There are two types of contract surety guarantees: 

  • Bid bonds: Used in the bidding phase of a project to guarantee the contractor’s commitment to fulfilling the contract if it wins the bid.
  • Performance bonds: Protect the project owner by guaranteeing that the contractor will complete the project according to the contract's terms and conditions, even if the contractor defaults.

Typically, contractors are responsible for obtaining these bonds, with bond premiums included in the bid price and payable upon bond execution.

Benefits of surety guarantees for project owners

Surety guarantees provide owners and developers with multiple benefits, including:

  • Assurance that contractors have undergone rigorous prequalification and can fulfill contract obligations.
  • Financial protection through surety companies stepping in to complete the contract if the contractor defaults.
  • Enhanced risk mitigation, reducing exposure to project delays and financial losses.

Given the inherent risks in construction projects, surety bonds remain a commonly relied-upon financial risk mitigation tool for owners and developers worldwide.

Why Marsh

Marsh provides unparalleled access to the full spectrum of regulated surety markets worldwide, enabling us to identify surety guarantee providers tailored to your business needs. Our comprehensive services include:

  • Arranging and optimising surety capacity.
  • Advising on surety program design and documentation wording.
  • Delivering strategic surety solutions aligned with your financial and operational goals.

FAQs

Bonds can be issued by banks or insurance companies. Banks typically provide unconditional, on-demand bonds that are independent of the underlying contract conditions and can impact working capital.

In contrast, insurance market bonds are conditional guarantees directly linked to contractual obligations. These instruments can preserve working capital facilities and offer greater flexibility.

In some countries, insurance market surety guarantees are preferred for their risk-based approach and financial advantages. For construction and engineering firms operating globally, maintaining bonding capacity from both sources can be a prudent strategy. 

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