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Chapter 11 Casualty reinsurance 11/31

J5 Bonds
Bonds are a form of surety insurance. Surety exists whenever one party guarantees performance by
Bonds are a form of
another party of an undertaking or obligation. A surety bond is a written agreement, whereby the surety, surety insurance
who issues the bond, obligates itself to a beneficiary or employer, to pay a stipulated amount in the
event of breach or default of a contractor.
Be aware
Under a construction bond the insurance company stands as surety to the employer that if the construction
company is unable to complete the contract works, then the insurance company will provide the financial means to
do so.

J5A Underwriting considerations
The underwriter will want to:
• determine what the obligee wants guaranteed;
• determine underlying terms and conditions of the guarantee;
• evaluate contractor’s qualifications; and
• assess if it is reasonable to expect the contractor to perform their obligations.

J5B Exclusions
The following is a list of typical exclusions for this class of business:
• Financial guarantees which covers financial obligations in respect of any type of loan, personal loan
and leasing facility, granted by a bank or credit institution.
• Reinsurance of facultative or treaty reinsurance concession bonds.
• Commercial and/or political trade credit.
• Bonds without defined limitation in time and amount.
• Fidelity guarantees. Reference copy for CII Face to Face Training
• Travel bonds.

K Miscellaneous risks

Three other classes of business, sometimes associated with the casualty department, are worth special
mention.

Miscellaneous
risks:
livestock/ extended
bloodstock warranty insurance

contingency

K1 Livestock/bloodstock insurance

Bloodstock insurance is the insurance of breeding horses, for example, thoroughbred stallions, mares
and foals.
Livestock insurance is the insurance of animals (typically farming animals) which are kept and used for
Livestock insurance is
profit and is of wider scope than bloodstock. Within this area there is also the insurance of exotics, the insurance of
which covers insurance of more unusual animals such as ostriches and zoo animals, and aquatics animals
insurance which covers the insurance of fish, usually on commercial fish farms. Chapter

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