Insurers may get financial creditor status from govt

To make the surety bond business more attractive, the government is looking at making relevant changes in the Insolvency and Bankruptcy Code (IBC) to consider insurers as financial creditors in case of default of infra projects.

“The surety bond issued by a general insurance company is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).

The surety is a company that provides the financial guarantee to the obligee (usually a government entity) that the principal (business owner) will fulfil their obligations.

According to sources, the ministry of corporate affairs is looking into concerns raised by the insurers that they should have recourse to recovery on par with the banks as forwarded by the Department of Financial Services under the finance ministry.