Policy Summary
The purpose of a bond or financial guarantee is to compensate the third party in respect of loss suffered as a result of the failure of the insured client to perform a task described in the contract. There are several types of insurance bonds as noted below
PERFORMANCE BONDS
Performance bonds are used when a contractor fails to complete contractual work or deliver the specifications defined as per Contract.
BID/TENDER BONDS
Bid or tender bonds are used when the cost of new tendering has to be incurred, should the highest bidder fail to take up an offer.
IMMIGRATION/SECURITY BONDS
Immigration or security bonds are issued to non-Kenyans whose conduct the insurance Company guarantees. Should one fail to be of good conduct, the insurance company undertakes to pay the costs of deportation &/or the consequences of her or his bad conduct. Kenyans living in foreign countries are also required to secure such bonds.
COURT BONDS
Court bonds are used when a court has the responsibility of administering the affairs of persons unable to do so for themselves for some reasons. The court appoints a receiver to administer the affairs of the person or the person’s estate. The court asks the receiver to provide a bond that will take care of any maladministration that might take place.
CUSTOMS/IMPORTS BONDS
Customs and imports bonds ensure that dutiable goods on which duty has not been paid do not find their way into the local market. Should the goods find their own way into the market; the insurance company will meet the duty payable by the Tax Authority Kenya Revenue Authority.
Customs bonds are generally given for goods in transit through the country or those produced in duty free zones targeting the export markets. Import bonds are given to cover duty for goods imported into the country.
WAREHOUSING CUSTOMS BOND
Bonded warehouses are premises where dutiable goods are deposited. Warehouse bonds guarantee payment of duty when goods leave the warehouse. It is a guarantee to Customs and Excise department of the Kenya Revenue Authority in respect of duties Payable.
ADVANCE PAYMENT BOND
If a client agrees to make an advance payment (sometimes referred to as a down payment) to a supplier, a bond may be required to secure the payment against default by the contractor. This is referred to as an advance payment bond, advance payment guarantee or advance stage payment.
Client profile
Ideal for: Tenderers for contracts in government and other corporates, companies and other importers who store goods in bonded warehouses awaiting payment of custom duties to the government at the point where the goods need to be released for production or sale, Bonded warehouse operators, contractors, foreigners working locally under work permit etc. The Bond is given by the insurance company to the third party such as the revenue authority or immigration departments of the government guaranteeing that duty will be paid at a future date and good conduct of the foreign worker whilst in Kenya respectively.
