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This blog discusses risk management and insurance for surety bonds and bank guarantees. If you are interested in this article, please share it with your colleagues so they understand like you.
There are many transactions and contracts involving various parties in business and industry. To ensure continuity and security in contract execution, surety bonds and bank guarantees are essential instruments used. Surety bonds and bank guarantees guarantee related parties that the agreed obligations will be adequately fulfilled.
However, cases of abuse of surety bonds and bank guarantees have recently increased, causing significant financial losses. Therefore, we need to understand how crucial it is to choose a provider insurance company and use an insurance broker company that is official and registered with the Financial Services Authority (OJK).
This article will explain why surety bonds and bank guarantees are essential in maintaining stability and trust in business transactions. We will also highlight the risks of choosing the wrong insurance company and the benefits of using an official insurance brokerage company registered with the OJK.
By understanding the ins and outs of surety bonds and bank guarantees, as well as the importance of the role of a trusted insurance company and insurance broker, readers will be able to make wise decisions in protecting their interests and business assets. We hope people can avoid unwanted abuse and financial loss through this article.
MEHAMAHI SURETY BOND GUARANTEE AND BANK GUARANTEE
Surety bonds and bank guarantees are an essential part of a contract or agreement between several parties, such as the employer (obligee), contractor (principal), and guarantor (surety). Both of these instruments function as a guarantee that the contractor will carry out his duties by the agreement that has been stipulated.
The employer asks for guarantees in money or assets to ensure the contractor can fulfill its obligations. The collateral will be confiscated and become the employer’s property if the contractor cannot meet its obligations.
However, getting surety bonds and bank guarantees is not easy because insurance companies and banks will conduct an in-depth evaluation and analysis of the contents of the contract. They will also examine the parties’ profiles, including background, work experience, permits, supporting parties, and what is no less important is the financial statements.
The guarantee request may be rejected if the evaluation results do not meet the requirements. Usually, contractors will try to find support from banks and other insurers. However, if the company’s financial condition is inadequate, insurance companies and banks will not be willing to provide guarantees, even by paying high insurance premiums and bank fees.
When the contractor cannot obtain collateral while the employer continues to demand immediate delivery of documents, this condition can be one of the causes of abuse in the issuance of surety bonds and bank guarantees. Another cause is the reluctance of the principal to incur costs for issuing surety bonds and bank guarantees or overconfidence that the project will run smoothly without such warranties.
The following are five significant cases of surety bonds and bank guarantees that have occurred in Indonesia:
- Issuance of a Fake Bank Guarantee Rp. 30 billion
As reported by kompas.com, on December 20, 2019, Polda Metro Jaya officials arrested six suspected fraud perpetrators for issuing bank guarantees worth IDR 30 billion.
- Morgan Stanley Receives Fake USD 55 Million Bank Guarantee
As reported by Detik Finance on April 29, 2011, that Morgan Stanley is being confused by The Fake bank guarantee ‘Bank Mandiri’ issued in connection with its credit facilities to several borrowing companies and obligors in Indonesia.
- PT Cikarang Listrindo (PTCL) – Demanding a Guarantee of Rp. 32 billion
Reported by Wartaonomi.co.id August 23, 2017, PT Cikarang Listrindo (PTCL) reported PT Hamson Indonesia (PTHI) to Bareskrim Polri Headquarters regarding allegations of counterfeiting bank guarantees issued by Bank Mandiri, with a police report number with the alleged crime being forgery and fraud.
- Recapital insurance was sued for US$ 4.6 million and US$ 1 million for US$ 3.6 million.
It was reported by CNN Indonesia on 29/06/2015 that KZIS sued PT Asuransi Recapital for not paying US$ 4.6 million in security bonds. The bonds consist of an advance payment bond of US$ 1 million and a performance bond of US$ 3.6 million.
- OJK received 51 Surety Bond case complaints in 2016
According to the news from kontan.co.id, based on the report of the Deputy Director of Insurance Supervision of OJK, the most complaints of insurance claims to OJK came from the suretyship line of business, amounting to 31% of 100% of all claim complaints. “There are 51 and suretyship. It covers projects in the infrastructure sector.
The cases above show that crimes in issuing surety bonds and bank guarantees are genuine. Therefore as a consultant and insurance brokers who are specialists in the field of Financial Risks, we recommend that companies always be careful when issuing the required guarantees. Always use the services of an official insurance consultant/broker registered with the OJK. Check the list of work experience and companies they have worked successfully with.
L&G has more than 10 years of experience in surety and bank guarantees. Has successfully issued thousands of surety bond certificates and bank guarantees for all industries. L&G has a unique team capable of conducting preliminary analysis before submitting it to insurance companies and banks and having excellent communication with leading insurance companies and banks issuing bank guarantees. All of this makes the publishing process faster and at a more competitive cost. For more information, contact L&G now!
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Liberty & General Risk Services (L&G Risk Insurance Broker) is an insurance broker who has more than 15 years of experience and focuses on handling insurance for the Business and Corporate sectors. L&G Risk focuses on the business and corporate sectors because this sector requires a special level of expertise in the insurance sector. Apart from being an insurance broker or insurance broker, we also act as experts in risk management of a type of business.
For the safety of our clients, L&G Risk is registered with OJK; we consistently report all our activities and are also supervised by OJK.
We have successfully handled various clients and claims with different types of insurance, including Marine Cargo Insurance, Mining Insurance, Coal Mining Insurance, Construction Insurance, P&I, Bank guarantee, and Surety Bond.
To get the best insurance coverage, contact immediatelyL&G Insurance Broker. Insurance brokers experienced more than 15 years. Registered at Financial Services Authority and joined the Association of Indonesian Insurance Brokerage Companies (APPEARING).
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