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Guarantee Insurance for International Contracts Guarantee

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					   Guarantee Insurance
for International Contracts


       Reinsurance Team
                  Contents

I.     Introduction to Guarantee Insurance
II.    Products
III.   How to use Guarantee Insurance
IV.    Bond Procedure and Required Documents
V.     Bond Procedure for International Contracts
VI.    Claims Process
VII. Contact Information


                        1
I. Introduction to Guarantee Insurance

        What is Guarantee Insurance?

        Relationship

        Principal (Obligor)

        Beneficiary (Obligee)

        Surety Company

        Bond Demand

        Bond Issuance Procedure



                        2
                                 Ⅰ. Introduction to Guarantee Insurance


What is Guarantee Insurance?

- Guarantee Insurance was created as a form of insurance to indemnify
  the beneficiary or obligee against any loss in the event the principal
  (obligor) fails to perform its obligations as stipulated in the contract.


- Guarantee Insurance is a convenient economic device used instead
  of an indemnitor, deposit or real estate collateral to guarantee a
  contractor’s performance of the obligation or undertaking when
  the contractor conducts a wide range of economic activities.




                                     3
                       Ⅰ. Introduction to Guarantee Insurance


Relationship


                      Beneficiary            Insurance
     Underlying        (Obligee)               Contract
    Contract




          Principal
                                    Surety Company
          (Obligor)


                           4
                                Ⅰ. Introduction to Guarantee Insurance


Principal (Obligor, Contractor)


  - Guarantee Insurance relieves the principal of any difficulties arising
   from collateral that must be submitted as deposits to the beneficiary.



  - Guarantee Insurance is a cost-effective and time-saving alternative to
   collateral.




                                    5
                                Ⅰ. Introduction to Guarantee Insurance


Beneficiary (Obligee, Owner)

 - Guarantee Insurance transfers the financial risk from the owner to
   the Surety by assuring project completion and contract
   performance.


 - Guarantee Insurance assists the beneficiary economically by
  easier debt collection due to receiving compensation for claims
  on a prompt basis.


 - Guarantee Insurance economizes the personnel and materials
  needed for debt collection.


                                    6
                             Ⅰ. Introduction to Guarantee Insurance


Surety Company

   - The surety company (insurer) receives a premium from the
    principal (obligor).

   - The surety company promptly indemnifies the beneficiary
    against any loss in the event the principal fails to perform its
    obligations.

   - In the event of a loss, the surety company recovers the claims
    paid from the principal or counter-indemnitor(s) after the
    claim has been paid to the beneficiary.


                                  7
                                         Ⅰ. Introduction to Guarantee Insurance


    Bond Demand
                  BID                PERFORMANCE          MAINTENANCE
                 BOND                     BOND               BOND

                                         ADVANCE
                                         PAYMENT
                                           BOND

ANNOUNCEMENT            ENTER INTO THE             FULFILLMENT      GUARANTEE
 OF PUBLIC BID            CONTRACT                 OF CONTRACT
                                                                      EXPIRY




                  BID              PERFORMANCE             MAINTENANCE


                                            8
                                    Ⅰ. Introduction to Guarantee Insurance


BOND ISSUANCE PROCEDURE

                                    BENEFICIARY
                                     (OBLIGEE)




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                                                                  t
                                   ②Application

  PRINCIPAL                                                       SURETY
  (OBLIGOR)                        ③Issuance of Bond             COMPANY

                                     ⑦Recovery

                                        9
Ⅱ . PRODUCTS

 PRODUCTS

 MAIN PRODUCTS

 PREMIUM RATE

 PREMIUM DISCOUNT

 DISCOUNT IF COLLATERAL IS PROVIDED

 DISCOUNT ON LARGE BOND AMOUNTS




                10
                                      Ⅱ.PRODUCTS


PRODUCTS
     CONTRACT    CONTRACT
                                OTHERS
      BONDS       BONDS
                CONSTRUCTION
                PERFORMANCE
     BID                         LICENSE AND
                 SALE IN LOTS
                                    PERMIT
 PERFORMANCE
                  RESIDENTIAL
                                  TAXATION
 MAINTENANCE    REDEVELOPMENT
                                   COURT
  ADVANCE        DESIGN AND
  PAYMENT        SUPERVISION       FIDELITY
  RETENTION       MATERIAL
                QUALIFICATION
   CREDIT
                  PRODUCTS
                 GUARANTEE

                    11
                                                                                 Ⅱ.PRODUCTS

 MAIN PRODUCTS (1)
  Product        Principal                         Use of Bond                     Bond Period
                Beneficiary                     Loss Coverable
    Bid           Bidder        Bid deposit                                       Over 30 days
                                                                                 before bidding
               The owner of      The loss (Bond Amount) occurring in case the
                                                                                      date
                  Project       successful bidder does not enter into an
                                underlying contract or in case there are reasons
                                for the obligee to withdraw the bid deposit,
                                according to the relevant law.
Performance     The person      Contract deposit                                 Contract period
                 having to                                                          (or , Contract
                 provide a                                                        period + 60days )
              contract deposit
              The recipient of The loss in case the principal fails to perform
                the contract   the obligation stipulated in the underlying
                  deposit      contract
                                              12
                                                                            Ⅱ.PRODUCTS

 MAIN PRODUCTS (2)
  Product           Principal                      Use of Bond                    Bond
                                                                                  Period
                   Beneficiary                    Loss Coverable
Maintenance The person having to Maintenance deposit                          Maintenance
           provide a maintenance                                                 Period
                   deposit
                                                                                   (or ,
             The recipient of the Any loss occurring in case the Principal is
            maintenance deposit requested to make maintenance repairs or Maintenance
                                                                                 period +
                                  corrective changes for any defect(s), but      60days)
                                  does not make them, as stipulated by the
                                  underlying contract.
 Advance    The person having to Advance Payment deposit                      Performance
 Payment     provide an advance                                                  Period
              payment deposit                                                      (or ,
             The recipient of the Any loss occurring in case the Principal
                                                                              Contract period
              advance payment     fails to repay the advance payment or pay     + 60days )
                   deposit        for or return the advanced materials as
                                  stipulated in the underlying contract.
                                            13
                                                                               Ⅱ.PRODUCTS

MAIN PRODUCTS (3)
  Product        Principal                        Use of Bond                       Bond Period
                Beneficiary                    Loss Coverable
 Retention      The person     Retention Money                                     Contract Period
                 having to
                  return a
                 retention
                   money
               The recipient   Any loss occurring in case the Principal fails to
                   of the      return the retention money stipulated in the
                 retention     underlying contract
                   money

Construction   Constructor     Contract Deposit                                    Contract Period
Performance     (Obligor)                                                                (or ,

                 Owner         Any loss caused in the case that the Principal Contract period +
                                                                                  60days )
                (Creditor)     fails to perform the obligations as stipulated by
                               the main contract.
                                             14
                                                                             Ⅱ.PRODUCTS

MAIN PRODUCTS (4)
 Product         Principal                     Use of Bond                    Bond Period
                Beneficiary                    Loss Coverable
  Design          The party                                                  Construction
    &          responsible for Any loss occurring in case the Principal          period
                the planning
Supervision   and supervision fails to plan or supervise the obligation(s)
                The (owner)     stipulated in the underlying contract.
                 company/
                  authority
 Taxation      The tax payer     Collateral for tax                        Collateral period
                                                                           for tax payment
              The tax authority Any loss occurring in case the Principal       + 30 days
              or customs house fails to pay his/her tax duties or customs.




                                          15
                                                                               Ⅱ.PRODUCTS

MAIN PRODUCTS (5)
Product       Principal                         Use of Bond                     Bond Period
              Beneficiary                      Loss Coverable
 Court    The person having     Collateral for court                           There is no set
          to provide a court                                                    bond period.
          deposit to obtain a
               temporary
              attachment,
            injunction or a
              provisional
              deposition.
           The person to be     The loss that the Principal should
              attached or       compensate to the Obligee when the
          required to refrain   Obligee receives a title of debt relating to
             from doing a       the right of the claim for damages due to
             specified act.     the case stipulated in the bond.



                                          16
                                                          Ⅱ.PRODUCTS


Premium Rate
    Product       Premium Rate            Product      Premium Rate
                                       Construction    0.550%~1.000%
      Bid         0.035%~0.189%
                                       Performance       per annum
                  0.175%~1.926%           Design       0.459%~1.778%
  Performance
                    per annum          & Supervision      per annum
                  0.175%~1.232%                        0.750%~2.400%
  Maintenance                            Taxation
                    per annum                            per annum
                  0.175%~2.357%                        0.375%~0.750%
Advance Payment                           Court
                    per annum                            per annum
                  0.770%~3.000%           License      0.234%~1.000%
  Credit Sales
                    per annum            & Permit        per annum
                  0.088%~3.600%                        0.089%~0.538%
    Credit                                Fidelity
                    per annum                            per annum
                                  17
                                             Ⅱ.PRODUCTS


Premium Discounts


         Discount for        Discount if
          Preferred          Collateral is
            clients          Provided

          Discounts
          on a case-         Discount on
           by-case           Large Bond
            basis             amounts




                        18
                                                                                Ⅱ.PRODUCTS


Discount if Collateral is Provided.


If the principal (including the 3rd party) provides monetary collateral over
100% of the bond amount for the insurance contract, a 50% discount is
applied to the basic premium rates.

*Monetary Collateral
 Certificates of Deposit, Public Bonds, Certificate of Money in Trust, Guaranteed Bond, Bank
debenture, Listed Special Bond, Negotiable Certificates of Deposit(CD), Cover Bills(Except Credit
Union ), CMA issued by composite finance company(Cash Management Accounts), Beneficiary
Certificates invested in governmental and Corporate bonds




                                               19
                                                               Ⅱ.PRODUCTS


Discount on Large Bond Amounts
Discounts on Premiums calculated by each product line according to the
range of bond amount.


                        Bond Amount                            Discount Rate


 the amount exceeding 100 million won up to 500 million won         5%
    the amount exceeding 500 million won up to 1 billion won       10%
    the amount exceeding 1 billion won up to 3 billion won         30%
    the amount exceeding 3 billion won up to 5 billion won         50%
             the amount exceeding 5 billion won                    60%



                                      20
Ⅲ . How to use Guarantee Insurance


     Convenience of Guarantee Insurance

     Credit Line Agreement

     Discount for Preferred Clients

     Credit Limit Confirmation




                         21
                                         Ⅲ. How to use Guarantee Insurance


       Nation-wide branch                       Application & Review
             offices &                           of the Bond issued
         1, 000 agencies                          through the Web



                               Convenience
                                    of                   Discount for
Credit Line Agreement                                  Preferred Clients
                                Guarantee
                                Insurance


           Credit Limit                            Cancellation of
          confirmation                                Contract
     (construction business)                      & Premium refund


                                   22
                                           Ⅲ. How to use Guarantee Insurance


Credit Line Agreement



 Principals who make frequent transactions with SGIC are issued bonds

 without undergoing the underwriting process due to the underwriter

 taking into consideration the conditions for accepting the application

 and credit line amount according to the principal’s credit standing

 and business volume beforehand.



                                   23
                                             Ⅲ. How to use Guarantee Insurance



Discount for Preferred Clients



  After the credit analysis conducted by SGI, the principals selected as

  preferred clients can take advantage of various benefits such as discounted

  premium rates and quick bond issuance without the underwriting process

  (up to the predetermined amount).




                                     24
                                                  Ⅲ. How to use Guarantee Insurance


Credit Limit Confirmation
(Construction Business)


  According to the results of the credit/financial analysis and the receipt of

  deposit and collateral a credit limit confirmation is given to principals who

  meet our requirements.

 * credit limit confirmation
  The credit limit confirmation issued by the authorized financial institutions
  should be submitted to the registry office in order to register as a construction
  business.

                                          25
Ⅳ . Bond Procedure
             & Necessary Documents

       Bond Procedure



       Necessary Documents



       Bond Form




                        26
                                            Ⅳ.Bond Procedure
                                                & Necessary Documents

 Bond Procedure

                               Determine
                              the conditions        Secure         Bond
Application    Underwriting
                              for accepting       the collateral Issuance
                              the application



 Review
              Assessment                                         Receipt
  of the                       Collateral         Collateral
                   &                                              of the
underlying                      Decision          Acquisition
 contract     Underwriting                                      premium




                                 27
                                              Ⅳ. Bond Procedure
                                                  & Necessary Documents

Required Documents

- Application & Indemnity Agreement
                         in Korean & English (our prescribed form)

- A copy of the Underlying Contract

- Financial Statements (Balance Sheet, Income Statement and others)

- A copy of the corporation registry
                               & business registration certificate

- Other documents for the underwriting


                                   28
                                          Ⅳ.Bond Procedure
                                              & Necessary Documents

Bond Form

 - Korean Policy ( Refer to the Korean website; www.sgic.co.kr )



 - English Policy
      ( Refer to “Documents & Forms” on the English Web Site
                                   ; www.sgic.co.kr    English)
          Surety Bond Form




                               29
Ⅴ . Bond Procedure
      for International Contracts
  1. For Korean Contractors Working Overseas
    SGI‘s Direct Bond Issuance

    Bond Issuance in cooperation with Insurance Companies in
    the owner‘s country
    Bond Issuance in cooperation with Banks in the owner‘s
   country

    Bond Issuance in cooperation with Insurance Companies
    and Banks in the owner‘s country

    Bond Issuance in cooperation with Korea Exim Bank

    Bond Issuance in cooperation with H Bank

    SOC Project
                             30
                                                                Ⅴ-1 .For Korean contractors
                                                                          Working Overseas

 SGI’s Direct Bond Issuance


                                                                      Project Owner
              SGI
                                                                        (Overseas)
                                                 ③ Bond
                                                 Issuance

                                                            ④ submission of
                                                                 bond             ① Contract
- Application & Indemnity Agreement
   in Korean & English (our prescribed form)

- A copy of the Underlying Contract            ② Application
- Financial Statements                              &
  (Balance Sheet, Income Statement and etc.)   Payment of Premium
- A copy of the corporation registry                                           Korean
   & business registration certificate                                        Company
- Other documents for the underwriting

                                                   31
                                                        Ⅴ-1 .For Korean contractors
                                                                  Working Overseas
Bond Issuance in cooperation with Insurance Companies
in the owner’s country

Overseas Insurance                                              Project Owner
    Company                                                       (Overseas)
  (Fronting Company)
                                           ⑥ Bond
                                           Issuance
③ Request
    for                                               ④ Submission
                          ④ Notice of                                    ① Contract
 the Bond                                                of Bond
 Issuance                  acceptance
                                        ⑤ Payment
                                        of Premium


          SGI
  (Instructing Company)
                                                                      Korean
                                        ② Application                Company


                                           32
                                              Ⅴ-1 .For Korean contractors
                                                        Working Overseas
Overseas Insurance Companies in cooperation with SGI

China                 Ping An Insurance www.pingan.com.cn
Singapore, Malaysia   Lonpac Insurance BHD www.lonpac.com
Singapore             ECICS Limited       www.ecics.com.sg/
Vietnam               Baominh Insurance Corp. www.baominh.com.vn
Indonesia             Askrindo        www.askrindo.co.id/en/
Philippines           The Malayan Group of Ins. www.malayan.com
India                 The New India Assurance Co., Ltd. www.niacl.cpm
Egypt                 Misr Insurance Company       www.misrins.com
Taiwan                Central Insurance www.cins.com.tw
Mexico                HSBC Fianzas www.bital.com.mx
Europe                Atradius

                                 33
                                              Ⅴ-1 .For Korean contractors
                                                        Working Overseas

Bond Issuance in cooperation with Banks in the owner’s country

                                                    Project Owner
       Local Bank                                     (Overseas)
                             ④ Bond
                             Issuance

   ③ Counter-                           ⑥ Submission of
   Guarantee                                Bond              ① Contract
                        ⑤ Payment
                        of Premium


          SGI                                              Korean
                      ② Application                       Company
                       & Payment of Premium

                               34
                                                     Ⅴ-1 .For Korean contractors
                                                               Working Overseas
Bond Issuance in cooperation with Insurance Companies
and Banks in the owner’s country

     Local Bank                                              Project Owner
                                    ⑧ Bond
                                                               (Overseas)
                                    Issuance
 ⑥ Counter-
  Guarantee
                                                   ⑨ Submission
                                   ⑦ Payment         of Bond
   Local Insurance
     Company                        of Premium                        ① Contract
  (Fronting Company)

③ Request            ④ Notice of        ⑤ Payment
    for               Acceptance        of Premium
 the Bond
 Issuance                                                          Korean
         SGI                                                      Company
 (Instructing Company)             ② Application

                                      35
                                                 Ⅴ-1 .For Korean contractors
                                                           Working Overseas
Bond Issuance in cooperation with Korea EXIM Bank


     Local Bank                                          Project Owner
                                  ⑦ Bond
                                                           (Overseas)
                                  Issuance
 ④ Counter-
  Guarantee
                                               ⑧ Submission
                                 ⑥ Payment       of Bond
 Korea EXIM BANK                  of Premium                      ① Contract


                  ④ Notice of         ⑤ Payment
③ Counter-         Acceptance         of Premium
  Guarantee
                                                               Korean
                                                              Company
        SGI               ②       Application
                                / Payment of Premium
                                    36
                                       Ⅴ-1 .For Korean contractors
                                                 Working Overseas
Bond Issuance in cooperation with H Bank


                                                 Project Owner
        Bank                                       (Overseas)
                          ⑤ Bond
                          Issuance

 ③ Counter-                          ⑥ Submission of
 Guarantee                                Bond             ① Contract
                     ④ Payment
                     of Premium


        SGI                                             Korean
                   ② Application                       Company
                    / Payment of Premium

                         37
SOC Project
                                                 Submission
                                                  of Bond

                                  SPC                            Project Owner



  Bond Issuance on the                                                 Pledge on the
                                Construction                Lending
  Concession Contract                        Construction               SGI’s bond
                         Submission            expense
                          of Bond




    SGI                         Subcontractor                         Lender


          Bond Issuance on the Subcontract
                                       38
2. For Foreign Contractors Working in Korea




  SGI‘s Direct Bond Issuance


  Bond Issuance guaranteed by Overseas Surety
  Companies




                     39
                                                               Ⅴ-2 .For Foreign Contractors
                                                                           Working in Korea

     SGI’s Direct Bond Issuance

                                                                                Project
              SGI                                                               Owner
                                                 ③ Bond                       (Domestic)
                                                 Issuance

                                                            ④ submission of
                                                                bond                ① Contract
- Application & Indemnity Agreement
   in Korean & English (our prescribed form)

- A copy of the Underlying Contract            ② Application
- Financial Statements                              &
  (Balance Sheet, Income Statement and etc.)   Payment of Premium
                                                                               Foreign
- A copy of the corporation registry
   & business registration certificate                                        Company
- Other documents for the underwriting

                                                     40
                                                      Ⅴ-2 .For Foreign Contractors
                                                                  Working in Korea

Bond Issuance Guaranteed by Overseas Surety Companies



            SGI                                                   Korean
   (Fronting Company)                                          Project Owner
                                         ⑥ Bond
                                         Issuance
③ Request                                           ⑦ Submission
    for                 ④ Notice of                                    ① Contract
 the Bond                                              of Bond
                         acceptance
 Issuance
                                      ⑤ Payment
                                      of Premium

   Overseas Surety                                                  Foreign
     Company                                                       Company
  (Instructing Company)
                                      ② Application

                                         41
                 Ⅵ . Claims Process


Occurrence
Occurrence             Claim                 Loss
                      Claim                  Loss            Payment
                                                             Payment
     of
    of                   for
                        for                 Survey
                                            Survey               of
                                                                of
   a Loss
  a Loss             Indemnity
                    Indemnity                                  Loss
                                                               Loss
   Claim for
  Claim for            Beneficiary
  indemnity          Beneficiary            Survey Loss
                                          Survey aaLoss   Pay claim within
 indemnity              provides                 &
                       provides                 &
within years
within 22years      documentations        Determine the   10days following
   following       documentations         Determine the    determination
  following            (evidence)           Loss amount
   occurrence         (evidence)           Loss amount      of the amount
 occurrence            of the loss
                      of the loss
    of loss
   of aaloss                                              of loss to be paid.



                                     42
        Ⅶ . Contact Information
     General Consultation                    SOC Consultation
   Sung-Bo Shim_Team Manager
        Tel) 82 2 3671-7483                 Gab-Mo Kim_Manager
        sbshim@sgic.co.kr                    Tel) 82 2 3671-7362
     Sang-Kyu Lee_Manager                     kimgm@sgic.co.kr
        Tel) 82 2 3671-7459
      seaside4@sgic.co.kr
 Young-Suk Lee_Assistant Manager
       Tel) 82 2 3671-7485
       leeyseok@sgic.co.kr
   Consultation on products/            Credit Insurance Consultation
general conditions/premium rate          Jun-Hyuk Heo_Team Manager
   Bo-Sun Shin_General Manager               Tel) 82 2 3671-7668
       Tel) 82 2 3671-7335                   hjh5300@sgic.co.kr
         sbs@sgic.co.kr
                                   43

				
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