Technical & General wrote surety bonds for the construction industry
Unrated surety company Technical & General Guarantee Company has entered bankruptcy, leaving building contractors with worthless bonds and their brokers having to rearrange bonds for contracts that have already begun.
Swiss firm Technical and General (T&G) provided surety bonds for the construction industry along with other types of surety.
Surety bonds are typically taken out by contractors on large building projects and are paid out if the contractor defaults. This guarantees that the contracting company will be able to hire another firm to finish the work, and bonds are often required by contractors as a condition of employment. They can also be arranged to payout of the project is not completed on time.
In the UK CHJ Management acted as its marketing agent and introduced hundreds of clients to T&G over a period of years, via its large network of insurance brokers.
CHJ stressed that it did not handle client money and did not give advice.
T&G was declared bankrupt by the Geneva courts last week. Any claims must be sent in writing to the Bankruptcy Office in Switzerland.
A Biba spokesman said: “Any existing bond from a bankrupt firm is effectively worthless. The only solution would be for the broker to find an alternative market. This is not always straightforward as the initial bond is required based upon a contract which has not yet started.”
HCC, which underwrites bonds as part of Biba’s Trade Credit & Bonds scheme, operated by Perkins Slade, said it would look to arrange bonds for contracts which have begun, for Biba members.
“Unfortunately, brokers clients would need to pay a new premium for any new bond arranged. For some bonds from a failed firm where, for example the bond required was for £100,000, they may have agreed an indemnity at £70,000 with the client adding their own cash collateral of £30,000 . This collateral is often agreed as a monthly cash amount into a bank account of, say £5,000 per month. This cash contribution is also likely to be lost following the bankruptcy of T&G,” Biba added.
CHJ is continuing to arrange cover with its new carrier Gable Insurance, in a scheme administered by Kinetic Insurance Brokers.