Guarantee Insurance – New Opportunities for Bulgarian Business
Public Procurement Guarantees are gaining popularity after changes to the Public Procurement Act, in force since 15/04/2016, and are accepted as an alternative to monetary and bank guarantees.
Guarantee Insurance is a new and innovative product for the Bulgarian insurance market, and has a number of advantages. Thanks to this insurance, customers do not block funds and assets in a bank, allowing them to participate in more auctions. The process of issuing insurance is quick and easy, with the cost of the insurance often more competitive than the price of a bank guarantee.
Warranty Insurance is a specific tripartite contract between an employer, an executor and an insurer which aims to transfer the risk of executing an order from the contractor to the insurer.
The subject of insurance under Guarantee Insurance is the responsibility of the contractor when signing and executing the public procurement contract, according to the terms of the tender documentation. There are different types of Guarantee Insurance, depending on their purpose and the type of contract for which they are used.
The Performance Enforcement Guarantee serves to ensure the optimal performance of the public procurement contract, requiring only the contractor. The assignor will ask him/her to submit to sign the contract. Typically, the required amount of the guarantee is between 5% -10% of the contract value.
Advance Payment Guarantee – This guarantee serves to secure the assignor in case the contractor who received the advance has not fulfilled his obligations under the contract. The amount, terms and conditions for its release are expressly stated in the contract. Typically, the required amount of the guarantee is between 10% -30% of the value of the contract.
Maintenance Warranty – This serves to secure the assignor for a certain period of time after the conclusion of the contract, in case of poor performance. Typically, the required amount of the guarantee is between 5% -10% of the contract value.
Tender Guarantee – This guarantee serves to secure participation in a specific procurement if the participant withdraws their tender after the deadline, or refuses to conclude a contract if designated as a contractor. Typically, the required amount of the guarantee is between 2% -5% of the contract value.