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Financial Guarantee Bond (FGB) advisory for global corporate clients

What is a Financial Guarantee Bond (FGB)?

Basle Insurance Agency is a premier global provider of the Financial Guarantee Bond (FGB), a surety instrument that assures an obligee that the principal will meet a defined payment obligation. If the principal defaults, the surety pays the obligee up to the bond amount and the principal must reimburse the surety, on a secured or unsecured basis according to the principal financial strength.

How a Financial Guarantee Bond (FGB) works

An FGB is a three party surety instrument. The surety guarantees to the obligee that the principal will meet a defined payment obligation, and the principal indemnifies the surety for any amount paid.

Parties to the FGB

  • Principal. The company that owes the payment obligation.
  • Obligee. The government agency, regulator, counterparty or lender protected by the bond.
  • Surety. The carrier that pays the obligee if the principal defaults.

Secured and unsecured FGB

  • Secured FGB supported by collateral such as cash or a letter of credit
  • Unsecured FGB underwritten on the financial strength of the principal
  • Pricing and capacity reflect credit quality, tenor and collateral
  • The principal must reimburse the surety for losses and costs

Financial Guarantee Bond (FGB) coverage scope

Obligations an FGB can guarantee

  • Payment obligations to government agencies and regulators
  • Licence and permit bonds for regulated activities
  • Deferred consideration and earn out payments
  • Contractual payment commitments to counterparties
  • Tax and customs duty obligations
  • Statutory and regulatory deposits replaced by a bond

Financial Guarantee Bond (FGB) claim triggers

Typical triggers

  • The principal fails to pay on the due date
  • A valid written demand from the obligee under the bond wording
  • Surety review of the demand and the underlying obligation
  • Payment to the obligee followed by reimbursement from the principal

FGB compared with cash deposits and letters of credit

Where an obligee accepts a surety instrument, an FGB can preserve liquidity and bank credit lines.

Commercial advantages

  • Preserves working capital that cash deposits would lock up
  • Avoids drawing on bank credit facilities
  • Gives the obligee a regulated carrier as the payment backstop
  • Can be coordinated across several jurisdictions

Global obligee requirements

Obligees in the United States, United Kingdom, European Union and Asia Pacific set their own form, wording and carrier requirements for guarantees. Basle Insurance Agency coordinates wording, underwriting and carrier eligibility so that CFOs and General Counsel can satisfy each obligee efficiently.

Why Basle Insurance Agency

  • Singapore-based structuring desk serving clients in the United States, United Kingdom, European Union and Asia Pacific
  • Placement with licensed insurers and sureties, with wording shaped around your obligations
  • Senior specialist engagement for CFOs, General Counsel and Risk Officers
  • Coordinated documentation for boards, investors, lenders and regulators

Buyer FAQ

An FGB is a surety bond that assures an obligee that a principal will meet a defined payment obligation. If the principal defaults, the surety pays and then seeks reimbursement.

A performance bond guarantees completion of work under a contract. An FGB guarantees payment of money owed, such as fees, duties, deferred consideration or licence obligations.

A secured FGB is backed by collateral. An unsecured FGB relies on the financial strength of the principal and the indemnity agreement alone.

Typically financial statements, details of the obligation, the obligee bond form and an indemnity agreement. Collateral may be required for a secured structure.

A government agency, regulator, lender, counterparty or other party entitled to payment. Each obligee sets its own wording and carrier requirements.

Send the obligee name, bond amount, tenor, bond form and recent financial statements. A Basle specialist will respond with terms and next steps.

Request Financial Guarantee Bond (FGB) terms

Speak with a Basle specialist about an FGB for your payment obligation.

Request Financial Guarantee Bond (FGB) terms

Basle Insurance Agency arranges insurance and surety placements with licensed carriers. Availability, terms and pricing depend on jurisdiction, underwriting and regulatory requirements. Nothing on this page is an offer of cover or legal, financial or investment advice.