Default insurance and Surety bonds: The difference and how they operate
Mohammad Akhtar Beg
A construction project will almost always involve a number of agencies like subcontractors and suppliers whose performance will directly impact on the performance of the total project in relation to the accomplishment of a successful project completion. Owners and contractors are always at a risk of non-performance of these agencies, which may sometimes lead to catastrophic results for the owner or the main contractor. Surety bonds have been a traditional way of mitigating such risks, however recently a new product Default Insurance has been launched by Insurance companies which claims to serve the purpose of mitigating risks of non-performance of these agencies. The Paper analyses and compares between a surety bond and the insurance policy.