Performance Bond - Contractual/Finance/Insurance Question!

[TDIPLC]

Does anyone have experience of performance bonds within a supply contract?

The bond requires £x on deposit in a blocked bank account, which can be drawn down by the other party in the event of a failure to perform the contract.

All very sensible stuff, but I wonder whether it's possible to hedge/insure the risk?

Any thoughts?

[WinkleHoff]

Only have experience of PB's in relation to construction projects - on demand and adjudication bonds underwritten by the contractors bondsman/bank.

Also come across cash deposit bonds held in Escrow.

What are the principal risks that you are seeking to cover?

[WinkleHoff]

Only have experience of PB's in relation to construction projects - on demand and adjudication bonds underwritten by the contractors bondsman/bank.

Also come across cash deposit bonds held in Escrow.

What are the principal risks that you are seeking to cover?

[The Ferret]

Seems like an odd one to me. Exactly which risk are you looking to hedge/insure against. It sounds like the risk of you not being able to perform/supply, perhaps as a result of uncertainty over others further down the supply chain over a long contract period.

Or are you at the end of the supply chain looking to insure against the bond being rendered nugatory in the event that the principal doesn't perform and the bondsman becomes insolvent?

As above, my only exp is with bonds on construction contracts, and even then they are a joke at best. They want a bond to protect them against your failure to perform, then when you do you are left with a debt (and therefore a risk). I've often been tempted to ask for a bond in return against their non payment - but never had the balls!