A surety bond is a three-party agreement whereby the surety company guarantees to the oblige (the owner of project) that the principal (the contractor) will perform a contract according to the agreed terms and conditions of the contract, and within the allocated time and budget. Thus, the risks of project completion are shifted from the owner to the surety company.
In the case of a default by the contractors, the insurer will indemnify the project owner and subsequently seek recovery in line with its Legal rights of recourse. .
Surety Bonds are proven alternative to bank guarantees in many countries. .