Guarantees of performance of contractual obligations
Performance bond insurance is used when the client requires the contractor to provide financial guarantees that the contractual works or services, such as construction, goods delivery, equipment installation, or IT system development, will be completed in accordance with the agreed quality, scope, and timeline. Performance bonds are most commonly demanded in the construction sector.
There are several types of guarantees, including bid bonds, advance payment guarantees, performance guarantees, and warranty period guarantees.
Performance bond insurance is particularly relevant in public procurement projects and for projects funded by European Union funds.