With reference to the Surety Bonds consider following statements It is a three party agreement ...........

Economic Affairs Public Finance and Debt Management

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With reference to the Surety Bonds, consider following statements

It is a three-party agreement that legally binds together a principal who needs the bond, an obligee who requires the bond and a surety company that sells the bond.
It provide financial guarantee that contracts will be completed according to pre-defined and mutual terms.

Select the correct statement.

1 only

2 only

Both

None

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Explanation:

Insurance regulator IRDAI has formed a panel under G Srinivasan, director, National Insurance Academy, to assess the suitability of the Indian insurance industry or any other sector to offer Surety Bonds for road contracts in the country. Surety Bond is a three-party agreement that legally binds together a principal who needs the bond, an obligee who requires the bond and a surety company that sells the bond. Surety bonds provide financial guarantee that contracts will be completed according to pre-defined and mutual terms. When a principal breaks a bond’s terms, the harmed party can make a claim on the bond to recover losses. Currently, Surety Bond for contractors is not being offered by insurance companies in the market to guarantee satisfactory completion of a project by a contractor and provide performance security to various government agencies. Hence both statements are correct.