Insurance Bonds and Guarantees
Insurance cover, performance bonds and guarantees — issuance, tracking, and bond calls.
Group Policy & Procedure | Document No. | P-POL-024 |
Group Supply Chain | Ver. No. | Rev Date | 0.4 | 08 APR 2026 |
Title: Insurance, Bonds & Guarantees | Effective Date | 08 April 2026 |
BUKHATIR GROUP
Strength through Diversity
Group Policy and Procedure
Group Supply Chain (GSC)
Insurance, Bonds & Guarantees
Risk Transfer, Performance Bonds & Coverage Thresholds
Document No: P-POL-024
Copyright © 2026 Bukhatir Group
Revision Control
This document is issued under the authority of Bukhatir Group and applies when carrying out the activities described. Revisions may be issued as necessary under the authority of the Group Head of Procurement. Revision history is recorded below with every revised policy.
Revision History
Ver. No. | Effective Date | Description |
|---|---|---|
02 | September 2016 | Original Procurement Policy |
0.3 | March 2026 | Procurement Policy – Insurance, Bonds & Guarantees |
0.4 | 08 April 2026 | Redesign, content modernization & flowcharts – Insurance, Bonds & Guarantees |
Revision Sign-Off
Approving Committee | Name | Signature |
|---|---|---|
Endorsed by — Group Head of Supply Chain | Mohamad Koussa | |
Reviewed by — BIIL CEO | Mr. Ayman Ismail | |
Reviewed by — Group Chief Financial Officer | Mohamad Adnaan Sait | |
Approved by — Group Vice Chairman & Group CEO | Mr. Salah Bukhatir |
Distribution List
# | Departments |
|---|---|
1 | Business Unit Procurement Departments |
2 | Group Supply Chain (GSC) |
3 | Finance, Legal, Compliance, Internal Audit |
4 | Business Unit Management |
1. Purpose & Objective
This policy requires appropriate risk transfer via insurance, bonds and guarantees for procurement contracts. It protects Bukhatir Group from financial loss, project delays and liability exposure.
2. Scope
Applies to all procurement contracts, with particular emphasis on capital projects, works, construction and high-value service contracts.
3. When Insurance, Bonds & Guarantees Are Required
Risk mitigation instruments are mandatory when:
Trigger | Instruments Required | Authority |
|---|---|---|
All contracts > AED 500K | Performance Bond, Professional Indemnity Insurance | Finance approves policy terms |
All works/construction contracts | Performance Bond (10% contract value), CAR/EAR, Public Liability | Mandatory per contract |
Advance Payments > AED 500K | Advance Payment Guarantee (100% of advance) | Finance must verify before payment |
Subcontracting > AED 250K | Subcontractor Insurance, Workmen's Compensation | Main contractor responsible |
4. Types of Insurance, Bonds & Guarantees
Performance Bond
- Purpose: Guarantees the supplier completes the contract and meets performance obligations.
- Amount: 10% of contract value (standard).
- Beneficiary: Bukhatir Group (named as obligee).
- Validity: Must extend 90 days beyond contract completion date.
- Issuer: Approved UAE bank or international surety recognized by Central Bank of UAE.
Advance Payment Guarantee
- Purpose: Secures repayment of advance payments if supplier defaults.
- Amount: 100% of the advance payment value.
- Validity: Must remain valid until final invoice payment.
Professional Indemnity Insurance
- Purpose: Covers professional negligence, errors or omissions for service contracts (engineering, consultancy, design).
- Minimum Coverage: AED 2 million or 5% of contract value, whichever is greater.
- Beneficiary: Bukhatir Group named as additional insured.
Public Liability Insurance
- Purpose: Covers third-party bodily injury and property damage claims.
- Minimum Coverage: AED 5 million per occurrence (works/construction contracts).
- Beneficiary: Bukhatir Group named as additional insured.
Workmen's Compensation Insurance
- Purpose: Statutory cover for worker injury/illness (UAE law requirement).
- Coverage: As mandated by UAE Ministry of Human Resources & Emiratization.
- Responsibility: Contractor bears full responsibility for workforce coverage.
CAR/EAR (Contractor/Erection All Risks)
- Purpose: Covers physical loss or damage to works and plant during construction/installation.
- Scope: Equipment, materials, work-in-progress.
- Beneficiary: Bukhatir Group as loss payee.
- Deductible: ≤ AED 50K per claim.
5. Minimum Insurance Thresholds by Contract Type
Contract Type | Performance Bond | Public Liability | Professional Indemnity | CAR/EAR |
|---|---|---|---|---|
Services (low-risk, < AED 500K) | Not required | Not required | Not required | Not required |
Services (high-risk, > AED 500K) | 10% contract value | Recommended (AED 2M) | AED 2M minimum | N/A |
Goods Supply (any value) | Not required (unless custom-built) | Not required | Not required | N/A |
Works / Construction (any value) | 10% contract value | AED 5M (mandatory) | Not required | Mandatory |
Design / Engineering | 10% contract value (if implementation) | AED 2M | AED 2M (minimum) | N/A (if design-only) |
6. Bond/Guarantee Validity & Extension
90-DAY POST-COMPLETION REQUIREMENT All bonds and guarantees must remain valid for a minimum of 90 days beyond the contract completion date. This covers the defects/warranty period and allows claims for late discovery of non-conformances. Suppliers are obligated to extend bonds automatically or provide renewal certificates 30 days before expiry. |
7. Verification & Original Documentation
Finance must verify and retain original bond/guarantee documentation:
- Original bond document issued by UAE bank or recognized surety (not photocopies).
- Bond confirms Bukhatir Group as the beneficiary/obligee.
- Bond contains the performance condition (contract completion, quality standards).
- Validity dates are checked; expired bonds are not acceptable.
- Originals are filed in the contract master record in Oracle.
Digital scans are acceptable if the original is verified and certified by Finance.
8. Bond Call Procedure
If the supplier defaults or fails to meet contract obligations, Bukhatir Group may call the bond:
- Default Detection: BU Procurement documents the specific default (delayed delivery, quality failure, non-performance).
- Notification to Supplier: Written notice sent to supplier and surety, specifying the default and triggering bond call.
- Bond Claim: Finance submits formal bond claim to the surety with supporting evidence.
- Claim Timeline: Surety has 30 days to respond and settle (per standard bond terms).
- Settlement: Bond amount is received by Group and applied to costs of remedial actions or supplier replacement.
9. Central Register of Bonds & Guarantees
GSC BOND REGISTER Group Supply Chain maintains a centralized register of all active bonds and guarantees, updated quarterly. The register includes: contract number, supplier name, bond amount, issue date, expiry date, issuing bank. Reports are generated monthly and shared with Finance and BU Heads. |
10. Renewal Tracking & Alerts
Finance and GSC establish renewal tracking controls:
- 60-day advance notice: Suppliers are notified 60 days before bond/guarantee expiry to provide renewals.
- Automated alerts: Oracle is configured to alert Finance of upcoming expirations.
- Monthly reconciliation: All active bonds are reconciled against the insurance/bond register; discrepancies investigated.
11. Reference Forms
- Form F-INS-01 — Insurance & Bond Requirement Checklist
- Form F-INS-02 — Bond Call Request
- Form F-INS-03 — Insurance Certificate Submission
12. Definitions & Acronyms
Acronym / Term | Definition |
|---|---|
BU | Business Unit |
CAR | Contractor All Risks |
EAR | Erection All Risks |
GSC | Group Supply Chain |
AED | United Arab Emirates Dirham |
DOA | Delegation of Authority |
PO | Purchase Order |
SLA | Service Level Agreement |
UAE | United Arab Emirates |