Guarantee facility through insurer worth considering

Published on 19/02/2019

Guarantees are important financial products for smooth transactions between companies. Until recently, guarantees in Europe were usually issued by banks. However, there are more and more insurance companies that also offer guarantee facilities (Surety Bonds). Applying for guarantees through an insurer instead of a bank has its advantages.

No influence on credit facility

Bank guarantees are usually deducted from credit lines, which immediately reduces working capital. In principle, guarantee facilities through an insurer are available  white and therefore have no influence on the credit facility. This helps your organization to create more financial flexibility and grow faster.

Better international network

In a large number of countries (such as South America, Africa and the Middle East) it is mandatory to provide a local guarantee. Dutch banks hardly have any international offices that can issue bank guarantees locally. As a result, they have to use so-called correspondent banks. This causes extra costs and often causes delays. Insurers, on the other hand, are in most cases represented abroad and can often provide the local presence that is needed. Moreover, there are countries that only accept guarantees from an insurer.

Instant access

It is important that your organization has immediate access to warranty facilities worldwide. Insurers can offer a one-stop shop that makes it easier to provide and manage the guarantees you need. It is also possible to split off guarantee facilities to local branches, while the parent remains informed of the total exposure.

Competitive rates

Depending on the strength of your balance sheet, profit and loss account and solvency, among other things, insurers can provide facilities that are comparable to bank guarantee facilities. Syndications with banks are possible, but not preferred due to the legal costs. Normally, insurers join the information provided by existing lenders, so that there is no extra work for you. Insurers that provide guarantees generally have an AA rating, which means that in most cases they are better rated than banks. Together with the differences in European regulations (Basel vs. Solvency), all this means that insurers can guarantee a competitive price, despite the absence of collateral.

In Summary
In light of the above, any company that uses guarantees on a regular basis should consider applying for a guarantee facility through an insurer. They have access to an international network at competitive rates. Moreover, placing guarantees through an insurer has no influence on the credit facility.

Would you like to know more about what a guarantee through an insurer can mean for your financial flexibility?? We would be happy to take a look with you without obligation. Contact us at info@xolv.nl or 073 – 820 02 95. Our specialists are happy to assist you.

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