Issuance of independent guarantees by insurance companies

Independent, or demand, guarantees are strong securityinstruments. They designed to secure the properperformance of contractual obligations in commercialtransactions. In South Africa, independent guaranteesare a common feature construction projects where theinterests any main parties (that is, contractoror employer) may conceivably be secured. Essentially,independent constitute an undertaking by theissuer guarantee pay stipulated sum moneyto beneficiary upon presentationof conforming documents. The question payment is,therefore, determined with reference only thedocuments, and not facts outside documents.Consequently, under guaranteeis expected made expeditiously, provided conformingdocuments tendered. It is clear, therefore, that theproper functioning requiresthe use reliable financier. Internationally,banks can probably regarded as dominant issuersof guarantees. This much apparent ininternational jurisprudence, specifically case lawand academic writing. however, banksdo enjoy status, since marketis competitively shared between banks insurancecompanies, latter having recently emerged equallycoveted issuers beevidenced significant number law involvingan insurance company issuer, rather than bank. Thisarticle focuses on this development African law. Itseeks analyse ultimately provide rationale for theincreasing companies independent-guarantee transactions. analysis reveals followingfactors contributors growing practice:the favourable security requirements significance premium attachedto policies, increasing flexibility ofinsurance formulation