Guarantees (Bonds)

The new Public Procurement Act, in force since 15.04.2016, enabled the public procurement guarantees required by the contracting authorities to be provided in one of the following three forms: a sum of money, a bank guarantee or insurance, which ensures the implementation through coverage of the responsibility of the contractor (art. 111, para 5).

What is this type of insurance?

Insurance Guarantee is a tripartite contract between the Assignor, the Contractor and the Insurer, which guarantees the fulfillment of the obligations assumed by the Contractor. Peculiarities of this type of contract are that it is always concluded between three parties, and the payment of indemnity activates the right of subrogation of the Insurer to the Insured. Guarantee insurance is always concluded in addition to a signed Performance Contract and cannot exist independently.

Guarantee insurance in favor of a contracting authority has the following advantages:

  • lower costs;
  • without blocking funds;
  • without pledging assets and mortgages.

The term of the insurance contract is determined according to the terms of the tender documentation. The insurance is valid only on the territory of the Republic of Bulgaria.

What does the insurance cover?

Warranty insurance can provide coverage such as:

  • guarantee for participation in the auction;
  • guarantee of good performance;
  • advance payment guarantee;
  • warranty for maintenance / warranty period;
  • guarantee under EU funds;
  • other guarantees issued by an insurer.

The sum insured under the Guarantee insurance in favor of a contracting authority is determined as a percentage of the value of the contract or of its estimated value determined by the contracting authority.

The insurance premium is agreed between the Insurer and the Insurer, taking into account the risk factors of the insurance, the scope of the insurance coverage, the liability limit (sum insured), the term of insurance and after assessing the financial condition of the insurance applicant.