On May 6, 2025, IFFCO-Tokio General Insurance announced its entry into the surety bonds business, positioning itself among a limited number of insurers offering this specialized product in India. The move aims to support the country’s infrastructure sector, particularly in easing financial constraints for contractors involved in public projects.
Surety bonds are legally enforceable three-party agreements designed to provide financial assurance for infrastructure projects. They act as a safety net for project owners in the event of a contractor’s failure to meet contractual obligations. Unlike traditional bank guarantees, surety bonds do not tie up a contractor’s capital, making them especially beneficial for small and medium-sized firms.
According to IFFCO-Tokio, these bonds help expand the pool of contractors eligible for government and public sector contracts while also increasing the project-handling capacity of infrastructure companies. The construction industry has already issued bank guarantees worth Rs 1.70 trillion—a number projected to rise to Rs 3 trillion by 2030. Surety bonds are expected to play a growing role in this segment, offering contractors a viable alternative to conventional financial instruments.
By offering these bonds, IFFCO-Tokio aims to address the sector’s demand for risk mitigation tools that also promote trust among all stakeholders involved in infrastructure execution. The insurer highlighted that the construction industry is on the rise, and with the increasing need for infrastructure, the introduction of surety bonds could significantly benefit the market.
Despite regulatory approval in April 2022 for general insurers to offer surety insurance bonds, market adoption remains subdued. Industry experts point to challenges such as limited coordination between banks and insurers, insufficient data sharing, lack of regulatory parity, and weak enforceability of bond agreements. To address these issues, the insurance regulator set up a task force involving banks, insurers, and reinsurers to streamline operations and encourage wider use of surety bonds.
Bajaj Allianz General Insurance was the first to introduce such a product after the regulatory green light, but the entry of IFFCO-Tokio is significant as it brings a well-established player into the market. IFFCO-Tokio General Insurance is a 51:49 joint venture between the Indian Farmers Fertilisers Co-operative (IFFCO) and Japan’s Tokio Marine Group, one of the world’s leading insurance companies. Its entry into the surety bond segment is seen as a strategic step to align with India’s growing infrastructure needs while leveraging global best practices in insurance.
The surety bonds business is anticipated to not only enhance the financial landscape for contractors but also foster a more competitive environment in the infrastructure sector. As the demand for construction and infrastructure development continues to rise, the introduction of surety bonds could provide much-needed support for contractors and project owners alike.
In conclusion, IFFCO-Tokio’s foray into the surety bonds market represents a crucial step towards addressing the financial challenges faced by contractors in India. By providing a product that eases capital constraints and enhances trust, the company aims to significantly impact the infrastructure sector's growth in the coming years.
