Example Bond insurance

In bond insurance, the insurer assumes the guarantee for the proper performance of certain contractual duties. The insurer thus guarantees, for example, that a contractor will meet its contractual obligation to build the agreed structure.

In the event of an insurance claim, the beneficiary is the principal. Bond insurance is therefore of great significance in connection with large construction and infrastructure projects.

The insurer bases its risk assessment on an examination of the policyholder's solvency and experience in the field in which it has assumed contractual obligations and on an evaluation of the policyholder's technical capacity and manpower capabilities. In 2004, environmental aspects were added to the risk identification process as a further component of risk assessment - and for good reason. The main benefits Munich Re sees in this are

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  the avoidance of additional costs or delays in projects due to possibly unforeseen problems,
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  the protection of Munich Re's image in connection with projects that are a matter of public debate,
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  the promotion of internationally accepted standards (OECD, World Bank).

For certain areas and certain risk volumes, Munich Re will also include environmental aspects as a further criterion in the risk evaluation of its bond business. The very nature of the business we conduct means that any influence we exert will mainly focus on sensitising our clients, the primary insurance companies, during actual treaty negotiations and renewal talks, within the framework of client forums, and in the course of our work on various committees. As in the banking world, the ultimate aim is for all the insurers and reinsurers involved to undertake a joint obligation that when they provide guarantees, they examine the respective projects on the basis of certain environmental standards and insist on compliance with them.