The Insurance Regulatory and Development Authority of India (IRDAI) on January 3, 2022 has issued IRDAI (Surety Insurance Contracts) Guidelines, 2022. This shall come into force from April 1, 2022.
The following was introduced in the guidelines namely: -
• In Clause 4 which specify “Essential Features of Surety Insurance contract” the following has been inserted namely: -
“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””
• In Clause 6 which specify “Requirements of Underwriting of Surety Insurance Business” the following has been inserted namely: -
“General Insurer shall commence Surety Insurance business subject to meeting the requirement of maintaining a solvency margin of not below 1.25 times of the control level of solvency specified by the Authority. Provided that where the solvency margin of the insurer falls below the specified threshold limit at any point of time, the insurer shall stop underwriting new Surety Insurance business until its solvency margin is restored to above the threshold limit”
• In Clause 8 which specify “Maintenance of Data Base, Information and Reports” has been inserted namely: -
“The data of Surety Insurance contracts underwritten by all general insurers shall be submitted to Insurance Information Bureau of India (IIBI) as may be prescribed”
[Notification No: IRDAI/NL/GDL/SIC/01/01/2022]
