IFFCO-Tokio General Insurance has entered the Indian surety bond insurance market, joining a small group of insurers authorised to offer the product since regulatory approval in 2022.
The company’s move positions it alongside peers such as New India Assurance, ICICI Lombard, HDFC ERGO, SBI General, Tata AIG, and Universal Sompo, all of whom have begun providing surety cover aimed at supporting public infrastructure projects.
According to IFFCO-Tokio, the introduction of surety bonds is intended to ease financial pressures on contractors involved in government-led construction projects. The company said it expects the product to help expand the number of contractors eligible for public sector contracts and “increase the project-handling capacity of infrastructure companies,” as reported by Mathrubhumi.
India’s construction sector has so far issued approximately 1.7 trillion rupees in bank guarantees, with the figure projected to reach 3 trillion rupees by 2030. IFFCO-Tokio noted that surety bonds offer an alternative that does not tie up contractors’ capital, potentially making them more attractive to smaller firms.
Despite initial expectations, the adoption of surety bonds has remained limited due to systemic challenges. Industry stakeholders have cited poor coordination between banks and insurers, limited access to data, legal enforceability concerns, and the absence of regulatory equivalence with bank guarantees.
In response, India’s insurance regulator has convened a task force comprising insurers, banks, and reinsurers to address these barriers and promote broader use of the product. Bajaj Allianz General Insurance was the first to launch a surety bond product following the 2022 approval.
IFFCO-Tokio, a joint venture between Indian Farmers Fertilisers Co-operative and Japan’s Tokio Marine Group, said its entry into this space aligns with India’s infrastructure ambitions while drawing on international insurance expertise.
