5 reasons for getting guarantees from your insurer as an alternative to your bank

You can choose between a specialised insurer or your bank for your guarantees. For the former, this is a core business, while for the latter it is a niche market. Until recently in Belgium, banks had a monopoly on the issue of guarantees, but this is gradually changing. More and more insurers with extensive expertise are entering the market. Yet, many companies still turn to their bank for guarantees because they are not aware of the product range and advantages offered by an insurer. The significant differences are definitely worth considering.

1. Your credit lines remain free

At banks, guarantees are usually part of the mixed short-term credit lines. Every surety therefore entails usage of this credit line, unless it is made through an insurer. Dealing with an insurer therefore allows your company to keep mixed credit lines free at the bank.

2. Surety without hard collateral

In order for a bank to make a credit facility available, your company must provide security and covenants, including for withdrawals in the form of guarantees. Not so if you issue a guarantee through an insurer. This guarantee is only based on the financial information on your company and the inherent risk associated with the specific guarantee.

3. Specialist guarantee managers

Your corporate banker is a generalist, not a specialist. This person provides advice on matters of investment project financing, working capital needs, cash management, insurance, credit cards, etc. And indeed, on guarantees. With an insurer, however, a dedicated specialist ‘guarantee manager’ is appointed who will commit 100% to this financial aspect. This makes him or her the ideal person to give you expert advice.

4. Customised guarantees

Your banker usually offers standard bank guarantees ‘on first request’. As a result, the bank must immediately pay cash when the guarantee is invoked. A rather dangerous situation that may put your company in a weaker position in relation to the other party. However, you can often negotiate other conditions. The insurer’s guarantee manager can help you in this respect. He or she proactively points out the dangers of certain types of guarantees and guides you through the preparation of ‘balanced’ guarantee texts.

5. High-performance technology and experienced specialists

Setting up guarantees requires a fair amount of administration. At least three parties are involved (client, guarantor and beneficiary) who communicate a lot with each other. This must be done quickly and punctually. At insurers, this administration is in the hands of specialists, and the software they offer has been specifically developed to manage guarantees.

9 results

Apr 15, 2021

Why are sureties and guarantees important for international trade?

Why are sureties and guarantees important for international trade? Discover our interview of Barbara Van Riel.

Sep 16, 2020 | Guarantees

Alstom relies on Euler Hermes Surety & Guarantees

Throughout the world, Alstom Group offers mobility solutions as a sustainable foundation for the future of the transportation industry. To that end, the company relies on Euler Hermes’ sureties and guarantees.

May 29, 2020 | Guarantees

What is the difference between a guaranty and a surety?

Guarantees and sureties offer parties more security and comfort. They are two different legal entities, each with its own rights and obligations. Discover the differences.

9 results