THE SURETY INSURANCE IS A WAY TO

GUARANTEE AN AGREEMENT BETWEEN PARTIES

Just as we dress appropriately to see a client, we also have to dress appropriately when we want to request financing.

The surety insurance works exactly like a guarantee, although with certain advantages when compared to bank guarantees and the Reciprocal Guarantee Company. It is a perfect substitute to guarantee a binding agreement between parties, just like a bond.

Thus, the surety insurance becomes a non-bank financial instrument that directly or indirectly allows improving the financial management of a company.

By using surety bonds v. bank guarantees it already allows a benefit by reducing the Bank of Spain Credit Reporting Agency financial risk and improves the bank credit scorings and, therefore, the capacities and prices to which we have access.

But it also implies that banks do not have access to sensitive information such as guarantees for tax deferrals, judicial guarantees, guarantees between private parties, or guarantees for security companies that imply a contribution of additional guarantees such as mortgages, guarantees from members, or pledges.

SURETY INSURANCE ACCORDING TO
THE NATURE OF THE ACTIVITY

SECURITY COMPANIES
Guarantees or surety bonds for security companies are a form of surety insurance (mandatory by law) in which the policyholder is the individual or legal entity that operates as a security company.

It is contracted at the request of the Ministry of the Interior to authorize the start of the activity (Spanish Royal Decree-Law, of September 14, previously regulated by law 23/1992).

SURETY INSURANCE ACCORDING TO
OBLIGATIONS TO THE PUBLIC ADMINISTRATION

PUBLIC BIDS
Provisional or bid bonds
A bond to ensure the completion of the tender process presented by the client to contract a certain work or service offered by the administration.

Bonds for execution of works or provision of services
They guarantee the proper execution of the contract in the agreed conditions as well as the guarantee period that can be established.

SURETY INSURANCE
ENERGY

CONNECTION TO THE ELECTRICAL NETWORK - RENEWABLE ENERGIES

This type of guarantee or surety bond offers a series of guarantees required by the State. The so-called bonds for connection to the electricity grid, guarantee that the developer does NOT desist and collaborate actively with the Administration during the construction of the photovoltaic plant or solar plant, until the projected facilities are put into service.  

The different companies that have projected photovoltaic installations with connection to the electrical network will be of two possible types:

  • Type I. Facilities that are located on roofs or facades of fixed structures such as buildings, warehouses or parking structures and that are located on an urban plot. These facilities are divided into two subtypes:
       - Type I.1: power less than or equal to 20kW.

       - Type I.2: power greater than 20kW.

  • Type II. All facilities not included in Type I above.


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SURETY INSURANCE
TAXES

TAX POSTPONING
Insurance for the postponement of taxes are guarantees or surety bonds that are presented as collateral for the deferral of any type of debt before the Tax Administration.

This insurance allows you to guarantee the payment of the deferral referred to in each case, such as: Corporation Tax, Economic Activities Tax, VAT and Social Security, among others.

SURETY INSURANCE FOR
ADVANCING FUNDS

SUBSIDIES
The insurance of advance payment of subsidies is a modality of the bond in which the policyholder (physical person) that receives the subsidy, can request the payment of the anticipated amount before its formalization.

It is usually contracted by companies that want to early deliver such subsidies as an aid to finance their project and not wait for the conclusion of the same to receive such subsidies.

This way, the company avoids taking on (almost always with its own resources) the planned investment or, at least, part of it, since it would receive the subsidy in advance.

The advantage is that it serves as a financial aid and since it is a technical guarantee, it does not accumulate bank risk, which does not affect its indebtedness capacity.

Additionally, with this type of bond, the Administration guarantees the successful endorsement of the subsidies that the company will receive. Subsidies can be from local authorities or Central Administrations, from the Agency for Innovation and Development of Andalusia (IDEA) or from the Spanish Agricultural Guarantee Fund (FEGA). There are different types.


SURETY INSURANCE
CONSTRUCTION

AMOUNTS ON ACCOUNT IN CONSTRUCTION WORKS
The purpose of securing the amounts for housing development is to guarantee the amounts delivered by the home buyers prior to the deed of the house.

It is a compulsory insurance contract by the Building Management Law, whereby the developer is obliged to contract it and falls on the private developer or the manager of the cooperative, according to the nature of the work. It must guarantee that the advances delivered by the buyer (usually 20-30%) are being used to undertake the works, so it is a guarantee for the buyer of the home, who can be compensated in case of default by the developer or cooperative.

Additionally, there is the possibility of having a surety insurance for housing developments by real estate developers as well as by cooperatives managed by a manager. From the construction license (including payments to the reserve account).

SURETY INSURANCE
BETWEEN PRIVATE INDIVIDUALS

PAYMENT OBLIGATIONS
Surety bonds between private companies can be used as a guarantee of compliance with a specific contract. It can be given at the request of one of the parties or by mutual agreement. Generally they are applied as a solid guarantee, alternative to the bank guarantee, which ensures the collection of a specific work or service by the contractor.

This is common in cases of rental income, repayment of loans, payment of other types of income, etc.

SURETY INSURANCE
JUDICIAL GUARANTEES

JUDICIAL RESOURCES
Judicial guarantees through a surety bond are an instrument made available to the plaintiffs to guarantee their procedural obligations under private law.

Additionally, they are an agile instrument, easily accessible and in which a third person (the insurer) acts as guarantor, translating into a greater guarantee for the insured in case of insolvency or bankruptcy of the policyholder.

This type of judicial guarantee is necessary to present appeals for sentences for labor dismissals, disputes, or dissatisfaction with the payment of taxes, convictions with suppliers or customers, sanctions for competition, and tax sanctions.


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