In insurance by granting to business of services of compensation of possible losses in the course of economic activities, there was a certain model of the organization of an insurance covering of risks. This model includes insurance of trade credits, and also grantings Surety Bonds.
Insurance of trade credits basically is extended in sphere of production and distribution of consumer goods, or investments into fixed assets. In sphere of building or, for example, investment projects with state participation Surety bonds which represent the agreement according to which the insurer gives to the beneficiary a guarantee are traditionally applied that the third party – the principal – will execute the contract commitments, obligations to enforcement authorities and supervising bodies.
The guarantees issued by the insurance companies though are subject to adjustment by the same rates and laws, as other kinds of insurance, have a number of features. First of all the tripartite structure of the guarantee contract concerns such features. Other kinds of insurance policies give protection to the holder of the policy. Surety Bonds, on the contrary, are acquired by the principal, but thus protect valuable interests of the beneficiary.
Other distinctive feature of guarantees consists that is usual they have no accurate period of action. If the project is postponed, the insurer who has issued the guarantee, remains on risk before its end. Even refusal of the principal to pay the award doesn’t release from the insurer from obligations to the beneficiary.
Process of adjustment of the market of insurance guarantees in the USA appreciably differs from other world. It is important that the given tool serves to a great extent for servicing of relations between a private sector and the state. So, for example, the governments of states or the Federal government practically don’t suppose to building projects of the company which obligations aren’t warranted through Surety bonds.
According to the fundamental law act as the guarantor in market Surety bonds any company registered in territory of the USA and answering to special points of the Code of general laws of the USA can. In particular, the company should have good a financial condition and the reporting, to perform the contract commitments, and also to have the capital paid by cash at a rate of not less $250 000.
The law also enters geographical restrictions of work of the companies which are engaged in issue of insurance guarantees, – they can work only in one state In the event that business goes at federal level or in other state, the company is obliged to have the local representative.
It is more than details concerning adjustment of the market of insurance guarantees it is possible to find in Code of Federal Regulation 31CFR223.122. According to this document for reception of the right of work in the market of insurance guarantees the company, besides following to special points of the Code of general laws, should address in Federal exchequer.
The certificate supposing corporation to the market of insurance guarantees, the certificate which stands out the companies after its check on observance of rates of the legislation is assured by the press of exchequer. The certificate is renewed annually. Besides, the companies are obliged to bring a security deposit which is conditional guarantee of provision of guarantees of the company and which sum should be not less than $100 000 in Exchequer.
The exchequer especially focuses attention that any guarantee can’t be considered valid if the guarantee is written out in state where the company has no license for work. This point actually establishes two-level allowing system: level of state and federal level.
The companies which have received the certificate, quarterly submit the financial reporting requirements to which establishes NAIC to Exchequer. To the companies which are engaged in insurance guarantees, it is forbidden to be engaged in credit activity in any kind. The exchequer also prohibits to the certificated companies to give out guarantees under one contract for the sum exceeding 10 % of an equity.
Concerning reinsurance of insurance guarantees a number of special requirements also is shown. The risks accepted within the limits of insurance guarantees should be reassured within 45 days. Federal agencies to which insurance guarantees have been given, can check up after 45 days, whether the risk is reassured and whether at reinsurance in contracts have been admitted what or the reservations narrowing volumes of risks, initially accepted by the insurer.
To overcautious persons in the market of insurance guarantees, as the almost same demands are made to the usual companies, wishing to give out insurance guarantees, difference only that net assets of the overcautious person should be not less than $500 000. Also overcautious persons should submit to Exchequer the specialized report of the insurer which they submit to an insurance regulator of state.
In the USA there is a number of normative documents, both at level of states, and at Federal level which demand from the state formations to perform purchases of the goods and services only in the presence of insurance guarantees.
At federal level the most important law, demanding to use insurance guarantees, is The Miller Act. The given law acts in the USA since 1935 and determines the basic requirements to contractors of building industry who are engaged in building, alteration or repair of public buildings by request of state structures.
According to The Miller Act contractors on all works financed by the federal budget or budgets of states, are obliged to acquire guarantees if the contract sum exceeds $100 000. And they are recommended to acquire bonds if the price exceeds $25 000. According to the law contractors should give two kinds of insurance guarantees: Performance bond and Payment bond. Object for warranting in guarantees on execution is the subject of agreement between the contractor and the state. Irrespective of a kind of guarantees, they should cover not only costs and obligations of the contractor, but also its tax obligations.
In the USA guarantees of the insurance companies cover 100 % of the price of the contract, bank guarantees provide usual only about 25 % and don’t extend on requirements of subcontractors. In the USA banks at issue of guarantees are obliged to use the rate recommended by state structures. This fact also considerably influences considerable distribution of insurance guarantees to the USA.
