Surety bonds


Surety bonds provide protection against the failure of a contractor to perform under a contract. The reasons for this are many and varied, but the most common are insolvency of contractor or breakdown of relations between contractor and employer.

Surety bonds are always supported by security, such as a corporate counter indemnity from the company or group of companies. In certain circumstances additional security may be required to secure the bond, such as cash deposits, charges over property, or personal guarantees.

There are usually three parties to a surety bond:

  • the surety (sometimes called the guarantor) who is the insurer,
  • the principal (the party who has undertaken to perform certain services under a contract), and;
  • the beneficiary (the party who is due to receive the services and who will receive the payment under the bond if the contractor fails to perform, often referred to as the obligee).

How surety bonds can benefit your business:

Bonds free up banking lines and valuable working capital, increasing your business’s efficiency and ability to do more business.

Types of surety bonds

Deferred consideration bond

Provides protection when selling an asset for payment over an extended period. An example would be selling a business or property where payment will be made over a number of years.

Duty deferment bond

Also referred to as HMRC bond or Movement Guarantee. Allows you to import, store, and distribute goods and delay payment of the custom and excise duty for an extended period, to relieve pressure on your cash flow.

Performance bond

A type of surety bond issued by an insurance company to ensure proper completion of (or the performance on) a project by a contractor. Contractors requiring a performance bond typically work in construction or service industries. The party issuing the contract will require the bond as protection in the event of failure or breach of contract by the contractor. It offers security that the contractor has the ability to comply with its obligations to fulfill the contract.

Retention bond

Issued in favour of an employer where they have agreed to waive their right to reduction of retention monies from sums owed to the contractor for work performed. The bond represents the retention percentage, which usually ranges between 3% and 5% of the contract price. Retention bonds can be a significant aid to cash flow releasing.

Tender bond

Also known as a Bid Bond. These are typically used in public works tenders and provide security that the contractor the work is awarded to will actually sign the contract and undertake to perform the work as contracted.

Advance payment bond

Also referred to as Advanced Payment Guarantee. Used in a number of industries including the Construction Industry. In the case of construction, the contractor may seek an advance payment prior to the project commencing in order to purchase high value plant or materials that are specifically required for the project. The client may call for an Advance Payment Bond to secure the payment against default by the contractor, for example if the contractor becomes insolvent. Typically, the amount of the bond equals the sum advanced.

Commercial performance guarantee

Provides a solution to support legitimate financial transactions, other than the raising of capital, subject to suitable collateral support.

Supplier payment guarantee

Gives security to a supplier that they will be paid for the goods or services that they supply on credit. This can be particularly useful where traditional Credit Insurance is not available.

Decommissioning, reclamation or reinstatement bond

Often requested by land owners, councils, governing authorities to ensure proper removal of the equipment and restoration of the environment to its pre-existing state. They are used for land fill waste operations, solar energy, wind turbines and quarrying, and may be a pre-requisite of planning permission by the Local Authority.

Section bonds

Also known as road or sewer bonds. The Section Agreement is put in place between the Developer and the Council or relative Water Authority to ensure the satisfactory completion prior to the adoption of a new road or sewer system on a development. The developer agrees to Bond or place cash collateral to the value of the road or sewer Works and covers that roadway or sewer until the end of the Making Good of Defects period. At which point the road or sewer should be adopted by the relevant authority, and the bond is released. Most common section bonds are Section 38 Road, Section 98 & 185 Water, Section 104 Sewer, and Section 278 Highways.

Tax warehouse bond

Required by HMRC for bonded warehouses where imported goods are retained until such time that the duty owed on the goods is paid. The size of the bond or guarantee relates to the potential duty due to HMRC on the warehouses average end of the month stock calculated over a 12-month period.

Our service


Our Surety Team has been placing surety bonds in the UK, Ireland and across Europe for more than 30 years and have gained wide ranging experience and real in-depth local market knowledge. We provide a range of bonds and guarantees, supporting our clients with traditional and bespoke surety solutions. We have established relationships with all the main surety markets and specialist underwriters; ensuring we can get deals done securing favourable rates, terms and conditions without delays.


We treat all clients with the same level of commitment and service, regardless of the size of the requirement. We begin with an analysis and understanding of your company and the projects it performs. We use this information to develop a carefully packaged submission that demonstrates your business principles, project success, and company growth. By providing an overview of your operations and business model, we eliminate assumptions, save time, and build confidence with the underwriter.


If you are new to bonds, our team will walk you through the process, advise on suitable bond wordings to meet your requirements and seek options from the surety market.


Should you require numerous bonds we can negotiate facility arrangements on your behalf to provide sufficient capacity for your contracting needs. We aim to provide the bonds you need when you need them, and our contractual advice on wordings helps your business avoid accepting onerous bond wordings.

Why Xenia?

Our teams are experts in their specialist areas of insurance. We work in collaboration ensuring we achieve the very best possible result for our clients. We also have:

  • Close relationships with key surety bond underwriters, which strengthens our negotiating position and ability to offer competitive terms to our clients
  • Access to efficient surety bond solutions enabling your business to win more business and trade successfully
  • Full access to the UK and Irish markets
  • Experienced surety bond specialists including construction professionals
  • Investment in continuous training and development of our staff
What we do icon
Christina Spelman headshot

Christina Spelman

Principal Technical Officer, Surety Bonds

T: +44 (0)7432 732210

E: [email protected]

Dave Smith headshot

Dave Smith

Senior Account Manager, Surety Bonds

T: +44 (0)7870 843957

E: [email protected]

Contact us

For more information on how our services can benefit your business, please get in touch. Telephone, email or submit a form.

T: +44 (0)3330 155005

E: [email protected]