
Industries
Glossary of Surety Terms
23 results
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The "fianza de crédito" is a Mexican product. It is a type of purchase payment bond. It relates to a supply and always derives from a Trade Contract entered into between the creditor/beneficiary (supplier) and the debtor (buyer); therefore, this document usually establishes a (trade-related) line of credit which, in most cases, is the same amount as the bond and defines payment terms, duration, and specific conditions.
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The indemnity agreement is the formalisation of a right of recourse. Recourse to the obligor (principal / risk) for losses is a fundamental characteristic of any surety product. This right is typically established by law and can be formalized either in the surety contract or in a separate agreement. To strengthen its enforceability, the right of recourse can be modelled to allow immediate drawing without prior discussion and/or to protect against the obligor’s insolvency (by pledging of company assets or the right to require it under certain circumstances as well as by adding third party counter indemnities).
The indemnity agreement is an essential element of the “zero loss UW” approach, securing the right of recourse.
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Companies that enter into futures contracts are required to provide collateral to cover any losses that can be incurred due to the daily changes in commodity prices. This collateral can be provided in different forms one of which is a Surety bond.
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