Letter of Guarantee Insurance

Canadian exporters must provide bonds to their foreign buyers. These are provided in a form of letters of guarantee or standby letters of credit. This is done to protect the accepted obligations taken under the contracts. When bonds are issued by financial institutions, you are required to provide a collateral supporting them. Usually, a portion of the line of credit is carved out for covering the collateral amount. This can severely affect the working capital allotted to carry out general operations.

This credit problem can be solved using performance security guarantee. It provides a complete unconditional and irrevocable guarantee to the financial institution. This will allow you to access your working capital and free up financial capacity under a cash reserve or credit line.

A performance security guarantee is issued essentially on bonding line. Different types of obligations are covered under this guarantee. Contractual obligations are the most common one.

3 reasons to purchase account performance security guarantee

1. Increases cash flow – Account performance security guarantee provides financial institutions with an assurance of full payment on any call made against the provided guarantees.

2. Business grows faster – Financial institutions gain confidence in issuing guarantees if they are protected. This will help you sail smoothly in pursuing new business opportunities.

3. Clarity in risk – Issuance requirements of your letter of guarantee is covered by account performance security guarantee at a pre-set rate. This informs you of your exact bonding capacity.

Performance Security Insurance

Performance security insurance is offered to compliment performance security guarantee. It is specifically designed to protect you from your buyers if they make a call against the letter of guarantee or standby letter of credit without any reason. In a case like this, performance security insurance will indemnify losses up to 95% of the losses as long as you have not breached the obligations mentioned under the contract. Performance security insurance can be used on its own or tied up with performance security guarantee.

Eligibility Criteria

1. Compliance with mandated obligations

2. Meeting general underwriting criteria

For more information on Contract Frustration Insurance, or to discuss your existing insurance policies, please call at 416 484-4545 or email us at cover@getcreditinsurance.ca. 

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