The role of letters of guarantee through insurance companies as a tool for financial flexibility for businesses in the construction sector was highlighted in his presentation at the 20th Real Estate, Property Development & Construction Conference & Exhibition, organised by Altia, by the Underwriting Manager of SoEasy Insurance, Angelos Panayi.
During his presentation entitled 'How Surety Insurance Unlocks Capital for Construction Companies', Panayi referred to the possibilities offered by the letter of guarantee model through insurance organisations for companies active in public and private sector projects.
Letters of guarantee without the commitment of funds
As he explained, SoEasy Insurance Brokers, in collaboration with international organisations, offers letters of guarantee in Cyprus and Greece for public projects as well as for selected private projects, without requiring the companies to commit funds or other assets.
These guarantees cover, among other things, a guarantee for participation in tenders, an advance payment guarantee, a guarantee for the faithful execution of projects, a guarantee for good operation and maintenance, as well as guarantees required for specific permits or regulatory procedures.
The company evaluation process
Panayi noted that letters of guarantee are issued to legal entities that undertake the execution of projects and that before their issuance, an evaluation process is carried out by the insurance company.
In this context, information regarding the contractor or principal, the type of letter of guarantee, the beneficiary, as well as the characteristics of the project are examined.
As mentioned, in order for a company to be assessed, it must have audited financial accounts for at least two years. In addition, newly established companies with less than three years of operation or businesses that are in losses or have negative equity cannot proceed with the process.
More opportunities to participate in projects
Finally, it was pointed out that the use of letters of guarantee through insurance companies can offer significant advantages for businesses in the construction sector. These include reducing dependence on bank financing, enhancing liquidity as funds are not tied up, and the ability to participate in more public or private tenders, which can increase opportunities for undertaking projects.
(Source: InBusinessNews)
