Liga Asuransi – Dear readers, how are you? Let’s continue our lesson regarding Counter Bank Guarantees.
For your information, the demand for counter bank guarantees in Indonesia is currently getting higher in line with cost efficient programs and simpler processes needed by contractors.
Contra bank guarantee is a derivative product of Surety Bond. Contra Bank Guarantee is Proof of Guarantee on Bank Guarantee issued by the Bank for the benefit of the “Contractor” or also knowns as (Principal) in fulfilling its obligations in accordance with the provisions of the “Owner of Work” (Oblige) principal agreement with the Principal, and if the Principal does not carry out his obligations in accordance with the provisions of the contract, then insurance provider (Surety) will pay 100% to the Bank on the claim of the Bank Guarantee submitted by oblige or project owner.
Furthermore, Surety reserves the right to demand reimbursement for the disbursement of The Contra Bank Guarantee by the Bank due to the Bank Guarantee provided by oblige or project owner.
The contra bank guarantee is intended to make it easy for the principal to meet any of the Conditions specified by the Project Owner or Employer for The Tender, performance Project, Advance Guarantee, Guarantee In a Maintenance of The Development Project that is being or has been completed, the Procurement Contract of Goods / Services, with more competitive costs and requirements compared to Banking.
Counter Bank Guarantee VS Bank Guarantee
In terms of shape and function there is no difference between a counter bank guarantee and a bank guarantee. Both are issued by banks.
The difference is in terms of cash flow and guarantees. The bank guarantee is usually issued by the bank and you as the principal (contractors) are required to provide funds of the required security value. The funds are held in the form of deposits during the security period. Or as a substitute it can also be in the form of fixed assets in the form of land certificates or vehicle BPKB.
While for contra bank guarantee the funds withheld are not your funds, but insurance company’s funds or guarantees from insurance companies to banks. Thus, you do not have to keep your funds in the bank during the life of the project. Even if there are only a few. So, in terms of cash flow you will be greatly helped.
Types of counter bank guarantees issued includes:
- Bid Bond / Tender Bond
- Performance Bond
- Advance Payment Bond
- Maintenance Bond
Information required for the issuance of Counter Bank Guarantee
- Completing application form counter bank guarantee while including documents:
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- Copy the Company’s deed and its changes (if any).
- Company Profile
- Financial statements of the last 2 (two) years that have been audited, except for new companies.
- List of jobs underway.
- List of completed jobs.
- Organizational structure and personnel list.
- Copy of Business License (UP, UJK).
- List of equipment owned.
- Tender invitation (for tender guaranteed applicants).
- Winner and Contract Appointment Letter or SPK Work Warrant (for Performance Bond Applicant).
- Letter of Agreement or contract (for Advance Guarantee Applicant).
- News of the handover of job I (for Maintenance Guarantee Applicants).
- Indemnity Letter which has been signed and confirmed before a Notary.
- Pay service fees
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- Contra bank guarantee claim procedure
- Claims (disbursements) can only be made by OBLIGEE.
- FLOW OF DISBURSEMENT OF COUNTER BANK GUARANTEE
Flow process of claim for counter bank guarantees
- The principal performs Default because it does not carry out projects in accordance with the Tender Agreement or Employment Contract.
- Oblige (project owner) as the recipient of the Bank Guarantee submits a claim (disbursement) accompanied by a default document from the Principal to the Bank that issued the Bank Guarantee.
- The Bank immediately notifies Surety (insurance company) that guarantees the Bank Guarantee within 2 days after the Bank receives the Disbursement Letter from the Oblige.
- Surety immediately notified the Principal upon notification of the bank’s disbursement of the guarantee.
- If within 14 (fourteen) days Surety does not confirm the disbursement of the Bank Guarantee, then the Bank can immediately disburse the Bank Guarantee to reduce the Surety ceiling in the Bank.
- Surety will apply for subrogation rights for bank guarantee disbursement payments that have been made by the Bank to oblige.
How to get a Counter Bank Guarantee?
Although the benefits of a counter bank guarantee are great, the process is not simple. You need the help of an insurance expert who has a good relationship with the bank. It is not easy to “marry” two parties who have different working principles.
The most suitable insurance expert to take care of the contra bank guarantee is an experienced Insurance Broker. An insurance broker is an insurance consultant who is on your side not on the insurance side.
The insurance broker will help you from the beginning of the preparation of documents, choose the right insurance company, contact the bank as well as negotiate bank fees and insurance premiums.
Insurance broker who will help you until the issuance of Contra Bank Guarantee by the bank within the specified time.
One of the insurance brokers who is an expert in providing Counter Bank Guarantee is L&G Insurance Broker. L&G has successfully issued thousands of Surety Bond certificates and Contra Bank Guarantees. From the guaranteed value of tens of millions to hundreds of billions of rupiah.
For all your Surety Bond and Bank Guarantee needs, contact L&G right now!
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L&G HOTLINE 24 HOURS: 0811-8507-773 (Call – Whatsapp – SMS)
website: lngrisk.co.id
E-mail: customer.support@lngrisk.co.id
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