What is bonding?



​​Buyers of certain goods and services look for written guarantees and demand that you as their business partner put up security when awarding a contract to you, to be certain that it will be carried out according to their wishes.

After all, it can turn out to be an expensive business if a contractor does not complete the work on time or fails to deliver badly needed components: precious time is lost, there are knock-on problems with payment and financial losses.

Bonding is a contractual triangle relationship where we vouch with our good name towards third parties for your obligation as a contractor. Bonding is also known as "surety". A principle for bonding is to indemnify a person who has no mutual relationship to the insurance company (external party). The bond or guarantee secures that the contractor (your company) will fulfil its obligations (or defects liability) under the contracts.

Under bonding cover, Euler Hermes assumes liability for you towards third parties for the most varied types of security – e.g. for your obligations as a contractor under construction and supply contracts. This can take the shape of bonds, guarantees or other kinds of surety. Euler Hermes is acting as a completely independent guarantor here. 

In essence, this means that in the event of default by the contractor, usually as a result of insolvency, the Employer will be able to recover the necessary additional costs they incur from the Surety up to the level of the bond.  

How does Bonding work?