Atradius Bonding FAQs

Find answers to the most frequently asked questions about Bonding and our services.

Signing documents at a business meeting

 Please read the following information in conjunction with the disclaimer at the end of this page.

Q: What is a Bond?

A:  A bond is an insurance agreement through which - subject to its terms and conditions- the insurance company (Atradius) provides ultimately monetary compensation to the Beneficiary in case the primarily obliged party, the Principal (our Customer) fails to meet its contractual or legal obligations.

Q: What is the difference between Bonding and Credit Insurance?

A: Credit Insurance is a two-party insurance contract between the insured company (our Customer) and the insurance company (Atradius). A bond is a three-party insurance contract between the insurance company (Atradius), the Principal (our Customer) and the Beneficiary.

Credit Insurance policies protect the Customer against the risk of non-payment from its Buyers. Contrary, bonds protect the Beneficiary against the risk of non-completion/delivery/performance/compliance from the Principal (our Customer).

In Credit Insurance there are a lot of Buyers and transactions. In Bonding usually one bond is issued on the basis of a single specific obligation of the Principal towards Beneficiary.

Recovery is a peculiarity of Bonding claims management, the insurance company benefits from a right to recover money - once paid to the Beneficiary - from its Customer. The Customer is in fact the ultimate responsible, since the insurance company inherits the rights of the Beneficiary. On the other hand, within Credit Insurance, the recovery actions are put in place against the defaulting buyers.

Q. Why do I need a bond?

A: Bonds are required in various business sectors, but especially in the Construction industry. Usually a  public or private contract develops into different and consequential stages: participation to a tender, award, funding, performance, maintenance. Atradius offers assistance to the Contractor and the Beneficiary following the contract step-by-step evolution; offering various types of contract bonds: bid, advanced payment, performance, maintenance, combination, and others.

Q: How does a bond protect the Beneficiary?

A: A bond provides the security to protect the Beneficiary against the default or insolvency of the Principal up to the insured amount  of the bond. For example, Atradius pays the Beneficiary in case of  failure of a Contractor to complete performance in accordance with the terms and specifications of the underlying agreement. Another example is when Atradius pays the Tax Authority or the Government body due to failure - by a corporate tax payer - to comply with taxes or custom duties.

Q: What information do I need to provide when applying for a bond?

A:  The information to be provided depends on the type of request. As an example, we may require:  

  1. Financial statements (at the least the last three financial years)
  2. Stakeholders’ information
  3. Business strategy (plan) for next few years
  4. Information on the underlying obligation (e.g. project contract, law requirement)

Q: How is my application assessed?

A: Atradius assessment is twofold: the prospect’s/customer’s creditworthiness (its probability of default as well as its potential capacity to provide recourse to Atradius) and the risk profile of its Bonding needs. 

We will evaluate the client’s financial information, detailed credit history of the business, its principal owners, along with management experience. In parallel, we will assess the Principal’s capability to fulfil the underlying obligations. As such, the following questions are usually considered closely:

  • Is the Principal capable of complying with its obligations towards the Beneficiary? 
  • What is the history of operations of the Principal? 

After the evaluation has been done, we will send you an offer, which sets out all terms and conditions required in connection with the underlying risk. 
 

Q: How quickly can a bond be issued?

A: Time varies and depends on the amount, complexity and nature of the case. Nevertheless, in most cases, a bond can be issued even within 24 hours.

Q: What is the duration of the bonds?

A: Bond duration varies depending on the type of bond and is strictly monitored in line with the internal underwriting guidelines and the law.

Q: When can a bond be terminated?

A: A bond is terminated at a specific expiration date (included in the underlying contract) or when the Beneficiary provides Atradius with a “release letter” which basically is a declaration that the underlying obligations have been fulfilled (and –as a consequence- Atradius is discharged).

Q: How much will my bond cost?

A: There are no fixed rates. Each case is reviewed upon its own merits. The premium varies, based on few components that have influence on the price, such as: the market practice, the type of bond (so the duration), the customer’s features and financial information.

Q: What is a claim?

A: A claim is a formal request (“call in payment”), made by the Beneficiary to the Bonding company, asking for a payment, based on the terms of the insurance policy/bond, as a consequence of the failure of the Principal to meet its contractual or legal obligations.

Q: What happens if a claim is filed against my bond?

A: Atradius will assess the call in payment for its validity and if approved - pays out the Beneficiary.

If Atradius considers the request baseless or partially grounded (unfair calling of a bond), legal actions could be evaluated to protect both Atradius and the Customer.

Q: Is a collateral required?

A: Collateral might be needed in some countries and cases in order to strengthen the credit worthiness of a prospect/customer and enable a positive final evaluation of a bond request.

Q: Can Atradius issue financial guarantees?

A: No, Atradius is not allowed to issue financial guarantees. In fact as financial guarantees are issued to cover financial obligations  and are granted by a bank or financial institution, these are products which fall out the scope of insurance.

Q: What is the appetite for Atradius bonds on the market?

A: Our bonds are widely accepted by Governments as well as large publicly traded companies and private enterprises.

Q: In which countries are Atradius Bonding active?

A: Atradius Bonding is active in 11 countries: Belgium, Denmark, France, Finland, Germany, Italy, the Netherlands, Norway, Luxembourg, Spain and Sweden.

Q: In which countries can Atradius Bonding issue bonds?

A: Atradius Bonding can issue bonds in the 11 European countries where it is present. Requests related to other countries shall be evaluated case by case by local Bonding teams, according to the relevant legislation on insurance licensing as well as some other factors, such as nature of the underlying obligations, terms and conditions, etc..

Disclaimer:

This report is provided for information purposes only and is not intended as a recommendation as to particular transactions, investments or strategies in any way to any reader. Readers must make their own independent decisions, commercial or otherwise, regarding the information provided. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this report is provided ‘as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from its use, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or corporations, or the partners, agents or employees thereof, be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any consequential, special or similar damages, even if advised of the possibility of such damages. 

Copyright Atradius N.V. 2017

Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation, advice or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.