Irdai To Modify Norms For Remuneration Of CEOs, Directors Of Pvt Insurers

Regulator Irdai on Monday came out with guidelines to ensure orderly development of the surety insurance business and surety bonds market.

The IRDAI (Surety Insurance Contracts) Guidelines, 2022 will come into effect from April 1, 2022, the regulator said in a notification.

Surety insurance pertains to a contract to perform the promise or discharge the liability of a third person in case of default.

As per the guidelines, the surety contracts will include advance payment bond, bid bond, contract bonds, customs and court bond, performance bonds and retention money.

The insurers will be required to have a board-approved underwriting philosophy for surety insurance business.

Surety bonds protect the beneficiary against acts or events which impair the underlying obligations of the principal. Surety bonds guarantee the performance of a variety of obligations, from construction or service contracts, to licensing and commercial undertakings.

"Surety Insurance Contracts may be offered to infrastructure projects of government/private in all modes," the guidelines said, adding that apart from contract bonds, the insurers may underwrite customs or tax bonds and court bonds.

Also, the limit of guarantee should not exceed 30 per cent of the contract value.

As per the guidelines, "Surety insurance contracts shall be issued only to specific projects and not clubbed for multiple projects" and "the insurer shall not issue any surety insurance contracts on behalf of its promoters/their subsidiaries, groups, associates and related parties".

Further, the contracts should not be issued where the underlying assets or commitment are/is outside the country, the Insurance Regulatory and Development Authority of India (Irdai) said.

The guidelines follows recommendations of a working group set up by the regulator to suggest steps to promote surety insurance business in the country.

The working group had suggested that the surety bonds should be accepted as an alternative form of guarantee by the Reserve Bank of India (RBI) and government departments and accordingly reflected in the appropriate contract documents.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor