Is your buyer abroad asking for bank guarantees in connection with the capital goods you are to deliver to him?
If you require an advance payment from your buyer, he will often require an advance payment bond from your bank. When tendering for contracts, a potential client may ask you to provide a bid, or tender, bond. Sometimes your bank may issue other types of guarantees on your behalf. Such guarantees will be a burden on your credit lines. Our bond cover facilities - the Fair Calling Facility and the Counter Guarantee - will free up your credit lines. Please read on to find out how these facilities work.
How does our bond cover protect you?
Atradius Dutch State Business bond cover protects you and your bank against the risk that your buyer will call a guarantee. We offer various forms of cover to suit your and your bank’s needs. We protect you from the risk that your buyer will wrongfully call a guarantee. We protect your bank from the risk of both fair and unfair calling of a guarantee.
We can offer you the following types of cover to protect you against losses in the event of unfair calling of a guarantee by your buyer:
- supplementary bond cover: i.e. as a supplement to your non-payment risk insurance policy from Atradius DSB
- stand-alone bond cover: for transactions for which you do not require cover for any other risks on your buyer
- bond cover under our Fair Calling Facility: for transactions for which you do not require cover for any other risks on your buyer but your bank requires a counter guarantee from us. (Please see below.)
We can offer your bank the following types of cover to protect it from the risk that your buyer will call a guarantee, whatever the reason.
- Counter guarantee. We will issue this guarantee to your bank if you have taken out supplemental cover with us.
- Stand-alone counter guarantee. We will issue this guarantee to your bank if you do not wish to take out any other type of insurance with us.
- Counter guarantee under our Fair Calling Facility. We will issue this guarantee to your bank if you are covered under our Fair Calling Facility.
The advantage of our counter guarantee is that the guarantee-issuing bank will not book the covered percentage of the guarantee amount under your credit facilities. This will free up capacity under your credit facilities for your working capital purposes.
Percentage of cover
- if you have insured your export transaction against manufacturing risk and the risk of non-payment by your buyer: up to a maximum of 95% to 98%
- if you have not insured your export transaction against manufacturing risk and the risk of non-payment by your buyer: up to a maximum of 80%
If we indemnify your bank under a counter guarantee, and your buyer’s calling of the guarantee was justified, we will recover from you the amount we paid to your bank. This is called our right of recourse. We will assess your company to estimate the chances of having to exercise our right of recourse. Your total liability for recourse for the counter guarantees which we have issued to your bank or banks may not exceed thrice your equity or that of your recourse guarantor (for example, a parent company). The total value of counter guarantees issued for a single export transaction may not exceed your equity or that of your recourse guarantor.
We will furthermore assess your and your recourse guarantor’s solvency, liquidity and profitability as well as your ability to successfully complete the export transaction as per the terms of your contract.
Which types of bonds can you insure with us?
- advance payment bonds
- performance bonds
- maintenance bonds
- retention bonds
- bid, or tender, bonds
How to apply for cover:
- You may use our application form to apply for cover for each contract. Your bank may need to issue several guarantees on your behalf for a single contract.
- You may apply for insurance with us prior to the date of issue of the guarantee(s). If we are prepared to underwrite the risks, we will issue you a promise of cover. You are to inform us when the guarantee is to be issued, at which time we will convert the promise of cover into an insurance policy covering the relevant guarantee(s). The promise of cover will remain valid for any insured guarantees which are still to be issued.
- On the application form you may request us to issue a counter guarantee to your bank.
- If you do not wish to take out insurance for your transaction but your bank wishes to receive a counter guarantee from us, your bank must apply for this directly with us.
Please click here to calculate your premium for bond cover.
Questions or advice?
Please contact an Atradius Dutch State Business advisor via +31 (0) 020 553 26 93 or email@example.com.