Surety Insurance – New Opportunities for Bulgarian Business

Surety insurance is a new and innovative product on the Bulgarian insurance market, with a number of advantages. With surety insurance, clients do not tie up funds and assets with a bank, which allows them to take part in more tenders. The process of issuing the policy is fast and straightforward, and its price is often more competitive than that of a bank guarantee. Surety insurance is a specific tripartite contract between a Contracting Authority, a Contractor and an Insurer, intended to transfer the risk of performing a given contract from the Contractor to the Insurer. The subject of surety insurance is the contractor's liability in concluding and performing the public procurement contract, in accordance with the terms of the tender documentation. There are different types of surety insurance depending on their purpose and the type of contract for which they are used. Performance guarantee – It secures the proper performance of the public procurement contract and is required only from the participant selected as contractor. The contracting authority will require it to be presented before the contract is signed. The required guarantee amount is usually between 5% and 10% of the contract value. Advance payment guarantee – This guarantee protects the contracting authority in case the contractor, having received an advance payment, fails to fulfill its contractual obligations. The amount, conditions and deadlines for its release are expressly stated in the contract. The required guarantee amount is usually between 10% and 30% of the contract value. Maintenance guarantee – It protects the contracting authority for a specified period after completion of the contract in case of poor-quality performance. The required guarantee amount is usually between 5% and 10% of the contract value. Bid guarantee – This guarantee secures participation in a specific public procurement procedure in case the bidder withdraws its offer after the deadline or refuses to sign the contract if selected as contractor. The required guarantee amount is usually between 2% and 5% of the contract value.