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Surety Bonds & Guarantees

Bonds and guarantees are often required from suppliers in complex projects to make sure performance  targets are met and any financial losses caused by delays or nonperformance can be recovered.

A surety bond can be defined as an agreement between three parties: principal, obligee and surety.

  • The principal (bondholder, business owner or contractor) purchases the surety bond in order to guarantee quality and completion of its obligations;

  • The obligee (bond holder’s client) is the party requiring the principal to purchase the bond;

  • The surety (insurance company) provides to the obligee the financial guarantee that the principal will complete the contracted work.

One Broker provides customized surety bonds and guarantees, based on specific contractual requirements and specifications. We will help your business comply from the beginning to the completion of the project and support you during the claims process.


How Do Bonds Work?

In case there is a nonperformance of the contract, the surety will investigate the details of the case and will pay the obligee if the claim is valid. After making the payment to the obligee, the surety will seek reimbursement from the principal for the amounts paid plus any legal fees.            


If a third party is responsible for causing the default, the surety has a right of subrogation and can recover their financial losses from the third party instead of the principal.


As shown above, the bonds work differently from an insurance policy, as the surety is entitled to recover from the principal the funds and any legal fees. The surety backs the performance of the principal and has to pay any penalties for delay or nonperformance, but finally they will reclaim damages from the principal.


It is in the best interest of all parties to try settling any dispute by mutual agreement and avoid going to court. Breaches of contract or anticipated defaults can lead to conflicts between the obligee and the principal. In such cases, the surety is not in a position to resolve the dispute, but will keep note of how the situation is settled.


Talk to our experts at One Broker to find out how we can help you with the surety bonds and guarantees you need in order to win projects and grow your business.