Two covers that protect not your assets against damage, but your ability to contract and to get paid: the guarantee you are asked for in order to sign, and the money you are owed when a client does not pay.
Surety and trade credit sit together because both answer for a payment obligation, but they look in opposite directions. Under a surety bond, the party that may default is you: the insurer guarantees to a third party — a public authority, a client, a landlord — that you will perform, and pays on your behalf if you do not. Under trade credit, the party that defaults is your customer: the insurer indemnifies the final loss a bad debt leaves you with.
The practical difference is reimbursement. Article 68 of the Spanish Insurance Contract Act closes its definition of surety with a sentence that changes everything: any payment made by the insurer must be reimbursed to it by the policyholder. A surety bond does not transfer the risk, it backs it: the insurer advances the money and then claims it from you. That is why underwriting looks more like a bank's than an insurer's, and why your balance sheet is examined before your claims history.
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Surety bonds and trade credit insurance occupy a place of their own in a company's programme. They do not indemnify damage: they operate on a payment obligation. And they are defined, one after the other, in Law 50/1980, the Spanish Insurance Contract Act.
Article 68 defines surety: the insurer undertakes, where the policyholder defaults on its legal or contractual obligations, to indemnify the insured for the financial loss suffered within the limits set by law or by the contract. And it closes by warning that any payment the insurer makes must be reimbursed to it by the policyholder. Article 69 defines credit the other way round: the insurer indemnifies the insured for the final losses suffered as a result of the definitive insolvency of its debtors.
They are two different businesses under one heading. In one, the risk is you; in the other, it is your customer.
Towards a public authority, either will do. Article 108.1 of Law 9/2017, the Public Sector Contracts Act, admits three ways of providing the performance bond: cash or government securities; a guarantee given by banks, savings banks, credit cooperatives, credit finance institutions or mutual guarantee companies authorised to operate in Spain; and a surety insurance contract with an insurer authorised to write that class.
The choice is not about price, it is about financial structure. A bank guarantee counts as bank exposure and reduces the company's borrowing capacity; a surety bond does not consume that line. For a business that tenders continuously and carries live bonds across several contracts at once, that difference decides how much working capital is left available. The comparison in full is in bank guarantee versus surety bond.
What does not change with the choice is the substance: whoever pays on your behalf will claim it back from you afterwards.
As a brokerage registered with the Spanish insurance regulator, the Dirección General de Seguros y Fondos de Pensiones, under reference J0140, New Brokers acts on the client's mandate, not on any insurer's behalf. In surety that matters in a very specific way: a bonding facility is not negotiated once, it is sized and revisited as the company grows and accumulates contracts. Splitting the exposure between the bank and the insurance market, and keeping capacity available for the next tender, is structural work rather than a comparison of commissions.
In credit, the value sits before the loss: the grading the insurer applies to each debtor works as a continuous risk analysis over your customer book, and its limits deserve to be negotiated just as the wording is.
The 5% of the final tendered price that the Public Sector Contracts Act requires from the successful bidder. A surety bond is one of the three admitted ways to provide it, alongside cash and a bank guarantee.
Answers for your holding the offer open until the contract is perfected. It is required only exceptionally and with stated reasons, and may not exceed 3% of the tender base budget.
A further tranche of up to another 5% of the final price that the contracting authority may require in special cases, provided the tender documents say so.
The performance, advance payment or good execution guarantee a private client requires under works, supply or service contracts. Here the wording is set by the contract, not by statute.
Those a sector-specific rule requires in order to carry on an activity: travel agencies, waste management, transport, concessions and administrative authorisations.
Replaces the cash retention a client would otherwise hold back from your invoices during the maintenance period, releasing working capital that would stay locked up.
Indemnifies the final loss caused by the definitive insolvency of customers in the domestic market, over a debtor book the insurer has graded in advance.
The same cover over foreign customers, where commercial risk is compounded by country risk and by the difficulty of enforcing a claim in another jurisdiction.
The service that comes with a credit policy: the insurer assesses each customer, assigns a limit and keeps that grading under continuous review.
Pursuing the unpaid debt on the insured's behalf. Recovery costs and legal costs form part of the final loss that is indemnified.
| Item | Statutory amount |
|---|---|
| Performance bond (art. 107.1 LCSP) | 5% of the final tendered price, VAT excluded |
| Additional bond (art. 107.2 LCSP) | Up to a further 5% |
| Bid bond (art. 106.2 LCSP) | Maximum 3% of the tender base budget |
| Payment on account of a bad debt (art. 70 LCS) | 50% of the agreed cover six months after notice |
| Credit indemnity (art. 71 LCS) | Not less than 50% of the final loss |
The percentages in this table are those set by the Spanish Public Sector Contracts Act and the Insurance Contract Act, and operate as statutory minimums or maximums, not as the terms of any particular policy. The amount guaranteed, the premium and all other terms are governed in every case by the specific conditions of each contract.
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Go to the client areaSurety and credit are declined for different reasons from other classes of insurance: what falls outside is less a type of damage than a situation in which the risk has stopped being uncertain.
Default that has already occurred, or is foreseeable, at the time of contracting. The guarantee covers a future obligation, not an existing payment failure.
Reimbursement to the insurer, which under a surety bond is never excluded: by statutory definition, any payment it makes must be reimbursed by the policyholder. This is not insurance that extinguishes your debt.
Business with ungraded customers, or above the limit assigned to them, under trade credit. Anything beyond the grading is for your own account.
Sales to related or intra-group companies, which fall outside credit cover because they are not independent third parties.
Debts already due and unpaid when that customer is brought onto the policy.
Penalties, fines and liquidated damages imposed on the contractor by the authority, other than the obligation actually guaranteed.
Political risk and measures taken by a foreign state, unless country risk cover is expressly bought for export business.
Technical disputes over performance of the contract: a surety bond answers for a declared default, it does not arbitrate whether the work was done properly.
Your company submits the best offer in a tender. Before the contract is signed, the contracting authority requires you to provide a performance bond of 5% of the final tendered price, VAT excluded.
What it means
You may provide it in cash, by bank guarantee or by surety bond. All three are admitted by statute, but only the last two avoid tying up cash, and only the surety bond leaves your bank credit line untouched.
A company that tenders regularly builds up live bonds across several simultaneous contracts, each locked in until its maintenance period ends.
What it means
If all of them run through bank guarantees, the accumulated exposure consumes the company's borrowing capacity and limits access to working capital. Splitting between the bank and the insurance market is a question of financial structure, not only of price.
A significant share of turnover depends on a small number of customers, on long payment terms and without security backing the sale.
What it means
The insolvency of a single one compromises the year. Trade credit insurance does more than indemnify: grading each debtor beforehand acts as a risk filter before payment terms are granted.
For surety, your own solvency is assessed, because the insurer takes on your risk of default and will later claim it back from you. For credit, we look at your debtor book, your sector and your history of bad debt.
We work out the volume of bonds you need live at any one time, and how much is better placed with the bank and how much with the insurance market, so as not to exhaust your borrowing capacity.
We take the case to the market. For surety we compare commission, issuing times and counter-guarantee requirements; for credit, the indemnity percentage, the grading limits and the cost of the assessments.
We issue the certificates each contracting authority or client requires, track the validity of every bond, and handle its release or cancellation once the maintenance period ends.
Construction contracting brings together bid and performance bonds, retentions over the maintenance period, and the ten-year structural liability under the Building Act.
Tender documents that call for a performance bond usually call, in the same breath, for a current liability certificate with a minimum limit.
On an export sale, credit cover on the foreign buyer and cargo cover on the goods in transit protect different stretches of the same transaction.
The insolvency of the company itself can lead to personal claims against its directors, which a surety bond does not cover.
Guarantees required by authorities or clients in other countries need locally admitted issuance in that jurisdiction.
Both are admitted by article 108.1 of the Spanish Public Sector Contracts Act as ways of providing the performance bond, and towards the authority they have the same effect. The difference lies in who carries the risk and what it consumes: a bank guarantee is issued by a credit institution and counts against the company's bank exposure, reducing its borrowing capacity; a surety bond is issued by an insurer authorised to write that class and does not consume that line. In both cases you remain liable afterwards to whoever paid on your behalf.
No. Article 106.1 of the Public Sector Contracts Act provides that it shall not be required, unless the contracting authority considers it necessary on public interest grounds and gives reasons on the file. Where it is required, the tender documents set the amount, which may not exceed 3% of the tender base budget, VAT excluded.
Once the maintenance period has expired and the contract has been satisfactorily performed. After the final account is approved and that period has run, if no liabilities arise, the bond is returned or the bank guarantee or surety bond is cancelled. The release decision must be taken and notified within two months; if it is delayed for reasons attributable to the authority, the authority must pay statutory interest for the period elapsed.
Article 70 of the Spanish Insurance Contract Act sets out four cases of definitive insolvency: a final court decision, a court-approved arrangement involving a write-down, an enforcement order that finds no unencumbered assets sufficient for payment, and agreement between insured and insurer that the debt is irrecoverable. Beyond those cases, six months after you notify the non-payment the insurer must pay you 50% of the agreed cover, provisionally and on account of the final settlement.
Whatever the contract sets, applied to the final loss. Article 71 of the Insurance Contract Act imposes two conditions: that final loss is calculated by adding to the unpaid debt the recovery costs, the legal costs and any others expressly agreed; and the percentage may not include the insured's profit, nor be lower than 50% of the final loss.
For surety, the annual accounts for the last two financial years, a schedule of live bonds with their expiry, and the tender documents or contracts requiring them. For credit, the list of customers with their volume and payment terms, the history of bad debt and, if you have one, the current policy with its specific conditions.
A bank guarantee and a surety bond guarantee the same thing to a third party, but their financial and operational effect differs. We help you decide which one fits each transaction.
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Surety insurance lets companies post guarantees and bonds to public bodies and clients without using bank risk lines or CIRBE. Here is how it works.
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What trade credit insurance covers, how it differs from surety (caución) insurance and how an independent broker manages your customers' non-payment risk.
Read→This information is for guidance only and is not binding. Covers, limits and exclusions are governed in all cases by the specific terms of each policy. New Brokers Correduría de Seguros, S.L., registered with the DGSFP under reference J0140.