Watch the latest episode of BPL Pulse featuring Hugh Friel, Vice President, Structuring, Africa at Frontclear. He joins BPL Global Director Charlotte Hampshire to discuss the role of DFIs in enhancing the stability of money markets in emerging economies, and Frontclear’s approach to delivering support to these regions. We’ve spent a lot of time in-country, […]
Surety
Due to the increased acceptance of surety as collateral in recent years, insurers have, in parallel, expanded their surety offerings beyond the traditional construction sector to respond to the increased demand for issuing capacity from both financial institutions and corporates. At BPL Global, we believe the surety market has key synergies with CPRI and should be an important consideration for our clients in managing their obligations and/or credit exposure to third parties
What is surety?
A surety bond is a legally-binding guarantee that a company will carry out its obligations to a third party, involving:
- The Principal (who requests the bond to be issued, i.e. a BPL Global client)
- The Beneficiary (who benefits from the bond that can be called in the event of the Principal’s default on its contractual obligations); and
- The Surety (who issues the bond, i.e. an insurance company)
While insurance transfers the risk of financial loss to an insurance company, with a surety bond, the Principal remains financially responsible for any loss to the Surety which guarantees the Beneficiary that the obligation will be honoured.
Our experience and expertise
Surety for banks and financial institutions
Working with the surety market is becoming increasingly commonplace among banks and financial institutions, as it enables them to:
- Ensure risk mitigation remains confidential;
- Meet customer capacity requirements and maintain relationships;
- Diversify risk distribution channels to insurance companies which have credit risk profiles that are not correlated to those of banks;
- Stay in control during the default and recovery process; and
- Potentially achieve capital relief (depending on the jurisdiction).
Given the strong credit rating of surety providers, this distribution tool can provide robust risk protection with the additional potential for significant capital efficiencies relative to the underlying exposures depending on the prevailing regulatory environment.
World Leading Expertise
Thanks to favourable developments in the surety market, we are now encouraging our diverse international client base to consider sureties for certain risks and exposures.
While the CPRI market has been insuring banks for over 25 years, the surety market has historically viewed banks as competitors. However, as corporate clients have sought additional capacity in multiple jurisdictions, the surety market has increasingly realised that partnering with fronting banks can help provide a global client solution.
Surety for corporates
With surety becoming more widely accepted as a form of collateral, corporates are now considering diversifying away from their traditional use of bank issued guarantees and standby letters of credit (SBLC) to an increased use of surety. The main advantage is that the surety market can provide corporates with an alternative to bank capacity and at a competitive price.
By shifting some of their guaranteeing / bonding requirements into the surety market, a corporate can free up its working capital and bank lines thereby enabling greater headroom for growth and opportunity.
Why work with us
BPL can play a key role in assisting banks and financial institutions in their distribution strategy to sureties. We can also structure facilities for corporate clients with the surety market. In the event that local regulations or counterparty requirements demand an SBLC or bank guarantee to be in place in certain jurisdictions, BPL Global can help source a local banking partner to front such a facility.
Find out what sets us apart:
In the news
BPL Global’s James Cook and Jonny Carruthers joined Özlem Özüner from Allianz Trade for a new edition of the LIBF Centre for Digital Banking & Finance Trade Finance podcast series. The discussion focuses on the history and future of Trade Credit Insurance, provides insights into technological advancements and embedded finance, and delves into e-commerce innovations.. […]
BPL Global has committed to support charities WeSeeHope and Justice and Care for another three years BPL Global has been a proud supporter of WeSeeHope and Justice and Care for many years, and has renewed its investment in both organisations until at least 2025 in recognition of their vital work and the successful partnerships to […]
We are pleased to announce a number of changes to BPL Global’s senior management team as part of the latest steps in our succession plans and long-term commitment to remain an independent, employee-owned broker. Our two Managing Directors, James Esdaile and Sian Aspinall, move into new roles. James becomes Chairman, assuming the role from Charles […]
Discussions related to political violence may assume that coverage can be divided into one of two distinct categories: terrorism or war. This assumption can often lead to insufficient coverage especially in deteriorating geopolitical climates, highlights Zoe Towndrow, Practice Lead, Political Violence at BPL Global. Speaking on a recent ‘Tuesdays With Lloyd’s’ webcast, Towndrow says that […]
BPL Global was announced Lloyd’s and London Market Broking Team of the Year at the British Insurance Awards in July 2022. “A true specialist, BPL’s expertise and value to the Lloyd’s and London market underlined its credentials as the winner of Broking Team of the Year. From a commitment to developing markets in support of […]
