Global capabilities: how surety supports complex projects

For companies considering expanding into new global markets, an international project’s complexity doesn’t have to be an obstacle. In fact, when approached intelligently, it can be an opportunity for new global expansion. Flexible financial solutions like  surety bonds  offer a layer of security that can facilitate projects across borders.

A surety bond is a guarantee to protect a third-party against losses on a large project where another party does not fulfil its contractual obligation. Such projects always have a level of intricacy to them, especially if they involve different trade sectors or countries. Our surety experts weigh in on how surety bonds play a key role in complex global projects and can give companies a competitive advantage.

What exactly are “complex projects”? Soenke Schottmayer, Head of Commercial at Group Surety, explains: “ We can look at the complexity of projects from three main angles. First, there is technical complexity, such as one might find in a domestic infrastructural project. Next, we have international complexity, where technical challenges might be combined with differing regulatory hurdles. And finally, there are complex joint ventures between companies.

Surety bonds create an essential layer of confidence that supports all types of complexity, especially international capabilities. In the US, many companies may be missing out on opportunities because they remain fixated on projects with less global complexity. Nicholas Verna, Head of Surety & Guarantee at  Allianz Trade in North America  , cautions on the limitations of having a single market focus when trying to be competitive.

“Regional surety bond brokers can have limited capacity in this regard and may not be able to fully support clients with international projects,” he says. “Many companies in the US have specific industry knowledge, but banks or surety bond brokers here tend to have less robust networks beyond US borders whereas Allianz Trade Surety does.”

Having a straight line to underwriters in the country where a project is set to take place is extremely valuable in large projects, Soenke says. “For an international project, the contract is likely written in the language and laws of the country where the project occurs. For example, let’s say a guarantor issues a bond to a client in  China   with an infrastructure project contract in  Brazil  . First, underwriters in China and Brazil must analyze the eligibility of the contractor before they can agree to issue a bond. Then, when this complex process and bond wording is completed, the guarantor can proceed to the next step. A surety bond company with international experience can more easily provide a guarantee to the party in Brazil so that the contractor in China will uphold their part of the contract so the project can proceed. These networks of reliable experts around the globe are a major advantage when it comes to advancing on elaborate projects with local particularities.”

Projects that span continents, culture, and language are full of opportunity. Christopher Shortell, Regional Head of Surety & Guarantees in Asia Pacific describes how surety bonds support the China Belt and Road initiative expanding across Latin America: “Chinese banks may not yet be in certain surety and banking markets in South America, so we can provide surety bonds to a Latin American beneficiary. As you can imagine, these are challenging projects requiring a team to negotiate in Chinese, and partners in Latin America to underwrite projects locally. The cultures are quite different. Bringing together Chinese contractors with Brazilian partners, for example, is extraordinarily intricate.”

Regardless of the complexity level, surety bonds offer protection against losses on large projects. This flexible financial solution enables global scope and can be a powerful tool when used with a direct line to local experts.

Allianz Group, Engineering and P&C Insurance leverages its technical underwriting capabilities around the globe, helping ensure successful global projects. Our powerful network is ready to help you take on complexity and pursue new global capabilities.