Construction
In recent years, it has become a challenge for most construction companies to obtain sufficiently large credit lines to cover the required performance and maintenance guarantees. Our expertise can help you navigate this issue!
The Swiss construction industry is a cornerstone of the country’s economy and is known for its precision, quality and innovation. In recent years, the industry has experienced steady growth, fuelled by robust demand for infrastructure development, residential construction and commercial projects. However, the industry is not without its challenges. Regulatory pressures, fluctuating material costs and the need for skilled labour are constant challenges that construction companies must navigate to maintain their competitive edge and ensure project success.
In this complex environment, managing financial risk and ensuring project completion is critical, particularly in relation to insurance requirements such as surety bonds and construction guarantees.
Surety bonds are essential when it comes to guaranteeing contractors fulfilment of their contractual obligations and protecting project owners from potential payment defaults. These bonds, including performance bonds, maintenance bonds, payment bonds and bid bonds, are essential to secure projects and maintain the trust of stakeholders.
Obtaining these bonds can be challenging as they involve rigorous underwriting processes that assess the contractor’s financial stability and past performance. In particular, the long duration of maintenance bonds leads to an accumulation of guarantees, exhausting the total limit granted by the insurer.
Ensuring that a construction company is adequately covered requires a deep understanding of these instruments and a sound risk management strategy involving a multitude of insurers.
Types of surety bonds for construction
Performance bonds
guarantee that a contractor will complete a project in accordance with the terms specified in the contract, focusing on the agreed quality and deadline requirements.
This bond is essential in projects where failure to meet standards could lead to significant financial loss and project delays, safeguarding the project owner’s investment.
Maintenance bonds
provide an assurance that any defects found in workmanship or materials after a project’s completion will be fixed by the contractor.
This type of bond is crucial for maintaining the quality and durability of the work over a specified warranty period, giving project owners peace of mind that any post-completion issues will be addressed.
Payment bonds
ensure that all suppliers and subcontractors are paid for their labor and materials in a construction project.
Bid bonds
are essential during the project tender process, ensuring that contractors submitting bids have the intent and financial capability to accept the contract if selected.
Our services in regard to surety bonds
Determining the strategy
In today’s market, managing your surety needs requires a short, medium and long-term strategy for engaging multiple insurers to support the development of your business.
Negotiations & placement
Once the strategy has been finalised, it is time to negotiate with the insurers and involve them according to your needs forecast.
Tracking & optimisation
As your business evolves, its goals and needs will constantly change. It is therefore essential to track your bonds and regularly optimise your programmes to ensure their efficiency.
Addressing the Accumulation Challenge: Leveraging Multiple Insurers for Surety Bonds in Swiss Construction
In Switzerland, it is a legal requirement that builders require sureties for construction projects in order to guarantee the fulfilment of contractual obligations. These sureties, which include performance bonds, payment bonds and maintenance bonds, are crucial in protecting clients from financial losses due to contractor defaults.
Under Swiss law, the terms of surety bonds are often very long, particularly for maintenance bonds, which can extend over 5 to 10 years. This long term is intended to cover possible defects and ensure proper maintenance after construction. However, this can lead to an accumulation of outstanding guarantees and put a strain on the credit lines granted by the insurers.
To mitigate this problem, a practical solution is to engage several insurers at the same time. This not only spreads the risk, but also ensures that the project owners have continuous insurance cover without exhausting the capacity of a single insurer. The legal basis for these requirements is anchored in Swiss contract law and construction regulations, which emphasise the protection of the parties involved and the integrity of the construction process.
This multi-insurer strategy is essential to maintain the financial health of construction companies and ensure the smooth running of their projects despite the long-term obligations of maintenance guarantees.
Why should you choose Raxell for surety bonds in the construction industry?
Raxell stands out in the Swiss construction sector for its expertise in guarantees. We understand the unique challenges of securing performance, maintenance and payment bonds and work closely with you to develop strategies that ensure financial stability and project success. Our extensive industry knowledge and commitment to protecting your interests make Raxell the ideal partner for managing complex guarantees to ensure your long-term success in this dynamic market.
