International Bonding

[h2o]

Why is it so hard to find a company that handles performance bonding overseas? What's the difference?

[Surety Queen]

Originally Posted by h2o

Why is it so hard to find a company that handles performance bonding overseas? What's the difference?

I don't know specifically, but I suspect that at a minimum the different laws would create a problem in the event of claims.

[Dallas Surety Broker]

Foreign bonding can be tough to place, for many reasons. If the surety isn't licensed in the country where the bond is needed, they may need to arrange for a local company to issue the bond and/or may need to arrange a fronting arrangement with a firm that is licensed. There are additional costs with issuing foreign bonds (higher transaction costs, fronting fees, taxes, etc.), so companies will only write sizeable bonds unless the bond is needed by a client with heavy bonding needs elsewhere. In some cases, the surety bond reads more like a letter of credit and is a forfeiture obligations, meaning the surety will take a full loss on the bond if a claim is made. This differs from here in the U.S. where sureties often maintain the ability to mitigate a loss (on most bonds) here in the states by having another firm complete the work and having access to contract balances.

[Admin]

Great post Dallas and welcome to the forums!

[bondman]

The difference will very much depend on the country that you are issuing the bond into. Most markets are very different to the US market where you are constrained due to the Miller Act and the 100% contract bond requirements. It is quite usual in many countries to have an on demand performance bond requirement (instead of the 'default' type bonds you issue in the USA), limited to 10% of the contract value. Let me know if you have a specific country in mond and i will let you know about common practice in that country.