3rd January, 2022
To
The Chairman-cum- Managing Directors/Chief Executive Officers of
General Insurance Companies (except ECGC Ltd and AIC Ltd)
Madam/Sir,
The Authority, considering the specific nature of Surety Insurance owing to the unique risk and features of the products, hereby issues the following guidelines to regulate and develop Surety Insurance business.
The guidelines shall come into force with effect from 1st April, 2022. The guidelines have been placed on the IRDAI website (https://www.irdai.gov.in).
Yours faithfully,
Chief General Manager (Non-Life)
IRDAI (Surety Insurance Contracts) Guidelines, 2022
- 1. Introduction
The Insurance Regulatory and Development Authority of India (‘‘the Authority’’), having considered it necessary to promote and regulate sustainable and healthy development of Surety Insurance Business, in exercise of the powers conferred under section 14 (2) (i) of IRDA Act, 1999, hereby issues the following guidelines.
2. Short title, commencement
2.1These guidelines shall be called the “IRDAI (Surety Insurance Contracts) Guidelines, 2022.”
2.2These guidelines shall come into force with effect from 1st April, 2022.
3. Applicability
3.1 All Insurers registered under the Insurance Act, 1938, to transact the business of general insurance may transact the business of Surety Insurance, subject to compliance with eligibility criteria as set out in these guidelines.
3.2 No person shall, after the commencement of these guidelines, transact the business of Surety Insurance in India unless the person is an Indian Insurance Company as defined in Section 2 (7A) of the Insurance Act, 1938.
4. Essential Features of Surety Insurance contract
The essential features of a Surety Insurance contract shall be as follows.
4.1 It shall be a contract of guarantee under Section 126 of the Indian Contract Act, 1872. It is a contract to perform the promise, or discharge the liability of a third person in case of his default. The person who gives the guarantee is called the “Surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”.
4.2 A contract of Surety shall be deemed to be an insurance contract only if made by a Surety who or which, is an insurer registered under the Insurance Act, 1938 to transact the business of general insurance.
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