The Insurance Regulatory and Development Authority of India (Irdai) has formed a task force to address the challenges and boost the growth of surety bond insurance. The task force comprises representatives from insurance companies, banks and reinsurers.
The insurance regulator and the General Insurance Council brought together key stakeholders in the surety bond market at a Surety Conclave in Mumbai to discuss key aspects including collaboration between banks and insurers, data sharing and expanding the scope of surety bonds.
Speaking at the conclave, Debasish Panda, Chairman, Irdai, said, “Surety bonds play a crucial role in supporting India’s infrastructure development. By addressing the challenges and fostering collaboration, we can harness the full potential of this valuable financial instrument. Today’s discussions have paved the way for meaningful collaboration among stakeholders, which will be instrumental in overcoming these hurdles.”
A surety bond is a risk transfer mechanism whereby an insurance company provides a guarantee to the beneficiary that the principal or contractor will fulfill its contractual obligations.
Discussions at the meeting highlighted the need for regulatory support and industry-wide cooperation to address issues such as the right of recovery by the Ministry of Corporate Affairs, the status of secured creditors and the need for faster judicial settlements.
During the conclave, the industry also discussed several challenges, including regulatory parity, enforceability of warranty indemnification agreements, and data access and sharing agreements.
In terms of regulatory parity, industry participants advocate equal legal remedies for insurers under the Insolvency and Bankruptcy Code (IBC), as enjoyed by banks. They also seek to strengthen the enforceability of agreements between insurers and beneficiaries of bonds. Efficient data sharing between institutions is also seen as a key concern.
Tapan Singhel, Chairman, General Insurance Council (GIC) and MD & CEO, Bajaj Allianz General Insurance, echoed these sentiments: “Collaboration between bankers and insurers, along with seamless data sharing, will be key in taking surety to the next level. The formation of a task force is a critical step towards ensuring surety becomes a cornerstone of India’s infrastructure growth story.”
Other attendees included Dinesh Khara, Chairman, State Bank of India, Sunil Mehta, CEO, Indian Banks’ Association (IBA), and TK Manoj Kumar, Chairman, Warehousing Development and Regulatory Authority (WDRA).
First published: August 23, 2024 | 17:39 IS
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