Guarantees Explained

What Is A Guarantee?

A guarantee is a form of third-party assurance issued by an insurance company or bank. It protects the beneficiary or employer in the event that the principal (main contractor) fails to meet their contractual obligations.

Some Explanations Relating to Construction Guarantees

Key Parties

Types Offered

Quotation Details

Accepted Collateral/ Securities

Claims Process

Cancellations

Disclosures

Beneficiary / Employer: Awards the project and receives protection under the guarantee.
Principal / Main Contractor: Responsible for performing the contract. The guarantee is issued in their name.
The Guarantor: The insurance company issuing the guarantee (facilitated by CivilSure).
CivilSure: A niche intermediary that arranges the guarantee facility, negotiates terms, and manages the process on your behalf.

Bid Bonds
Advance Payment Guarantees
Performance Guarantees
Retention Guarantees
Materials On/Off Site Guarantees
Mining Rehabilitation Guarantees
NHBRC Late Enrolment Guarantees

See Here To Learn More Indepth About These

The quote issued will specify:

Total facility limit
Premium Rate and minimum premium
Tangible Collateral requirement
List of required Security Documents
Any conditions attached to the Facility

Cash pledged to a nominated account (refundable after expiry)
Bank guarantee in favour of The Guarantor
Cession of:

Investment policies
Call or notice accounts
Fixed urban property (with valuation and title deed)

Security Documents

Deed of Indemnity: Enables the Guarantor to recover claim amounts from the Principal.
Deed of Suretyship: Signed by shareholders or third parties, ensures personal accountability in case of a claim. (Mandatory unless listed company.)

A claim arises when The Principal defaults on their contract. Steps:

Beneficiary submits a formal demand.

The Guarantor’s attorneys verify:

Guarantee wording

Validity of the demand

If valid: The Guarantor pays the Beneficiary and initiates recovery.

If invalid: Attorneys issue a formal repudiation. (

Repudiation, in simple terms, means refusing to accept or honor something.

In insurance, it usually refers to when an insurer rejects a claim and says they will not pay because they believe it isn’t covered under the policy or the conditions weren’t met.

Example: If you claim for flood damage but your policy doesn’t cover floods, the insurer may repudiate (reject) the claim.)

Only the Beneficiary can cancel a guarantee, subject to wording.
The Guarantor may also issue cancellation notice to the Beneficiary, depending on policy terms.

Fees: Civilsure earns a market-related fee for managing the facility.
Broker Commission: Paid as per regulatory guidelines and approved by The Guarantor.
Reinsurance: Guarantees are backed by reputable reinsurers arranged by Civilsure.
Conflicts of Interest: Fully disclosed in writing where applicable.

CivilSure Construction Guarantee Application Process

Timeframes: Facility Setup: 10-14 working days (including vetting and signing security)

Additional time for negotiations if insurer declines or attaches subjectivities: + up to 7 working days

This first 5-Step walk through is for applying for a facility. If you already have a facility with us, Jump to Applying For Individual Guarantees

Jump To Individual Guarantees

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Step 1 : Contact CivilSure Early

When: Ideally at tender stage, before contract award.

Why: We can issue a Letter of Intent to help you negotiate surety-style wording (less risky than on-demand guarantees).

How: Call us or complete our online enquiry form.

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Step 2 : Gather Required Documentation

This is the most time-consuming part, but it only needs to be done once.

Once your facility is approved:

You won’t have to re-submit these documents unless there are changes to the facility agreement.The only exception is updated Annual Financial Statements (AFS), which are required each year at renewal.

What we need:

Company profile and organogram

Two years’ annual financial statements & latest management accounts

3 months’ bank statements

CIDB certificate & tax clearance certificate

Letter of appointment (if applicable)

Full contract data and guarantee wording required

Identity documents & tax numbers of all directors

Details of any existing guarantees, legal matters, or insolvency history

Tip: Disclose all material information upfront (e.g., cash-flow constraints, unusual project risks). Non-disclosure can result in declined facilities.



Step 3 : Submission To Guarantor (Insurer)

Once we receive your documents:

Civilsure prepares a comprehensive quote request for the guarantor, including:

A summary of your business and its background.

Your industry and project experience.

Motivations to secure the most competitive rates possible.

We then submit this to one of our trusted guarantors (e.g., PCBS, Lombard, Hollard).

What the guarantor may consider:

Your financial strength and liquidity (cash reserves, debt levels).

Current workload and contract commitments (to ensure you are not overextended).

Past performance and guarantee history (previous claims, call-ups, or defaults).

Strength of your balance sheet (assets that can be used as security if required).

Experience and qualifications of your directors and key staff.

The guarantor performs credit vetting and a full risk assessment before issuing a facility quote.

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Step 3.1 : If the Insurer Declines or Attaches Subjectivities

If the insurer is unable to quote or attaches strict subjectivities (conditions):

Civilsure will review the feedback in detail with you.

We may request a meeting (in-person or online) to discuss potential solutions and the best way forward.

We may request additional security (e.g., property cessions, debtor book cessions, increased collateral) to strengthen the application.

We could approach alternative insurers or negotiate subjectivities to find a workable solution.

Minimum underwriting criteria:

Each insurer has certain baseline requirements (e.g., minimum turnover, minimum net asset value, or a clean financial history) that must be met for them to consider a facility.

If you do not meet these criteria, we will advise you on what can be improved to help you qualify in the future, or we will explore other options with you.

Additional timeframe: Negotiating subjectivities or alternative solutions can add up to an extra week to the facility approval process.

Our goal is always to secure your facility on the most favourable terms possible.

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Step 4 : Facility Quotation

If your application is approved, the guarantor issues a facility quotation.

Important points to consider:

1. Securities:

Securities are the assets or commitments you sign over to the guarantor as part of the facility agreement. These can include:

Personal sureties by company directors

Company-to-company sureties if multiple entities are linked

Cession (pledging) of debtors’ books

Cession of property or other assets

These securities give the guarantor recourse if the guarantee is called.

As the client, you must review and ensure you are comfortable with the securities being used. Ask questions if you’re unsure.

2. Collateral:

Collateral is a cash deposit held by the guarantor as additional security for each guarantee issued.

Typically:

20% for conditional guarantees (surety wording)

40% for demand-type guarantees (on-demand wording)

Collateral is held in an interest-bearing account by the guarantor and remains your property.

It is invoiced per guarantee and can be refunded to you once the guarantee expires and no claims have been made. You may also elect to leave funds in the collateral account to use for future guarantees.

3. Premium Rate:

Premiums are based on the guarantee amount and duration:

3.5% (conditional guarantees)

4% (demand-type guarantees)

Minimum premium is R5,000 excl. VAT per guarantee.

Next step: If you accept the quotation:

You will sign it and return it to Civilsure so the official paperwork can be prepared.

We will then move to facility activation.



Step 5 : Facility Activation

The facility documents must be signed in front of an attorney (either the guarantor’s attorneys or a corresponding attorney of your choice).

Cost: Approximately R4,000 (payable directly to the attorney).

Who must be present:

All directors of the company

Trustees if a trust is involved

Any third-party sureties or company representatives who will be signing security documents

What to bring:

Original ID documents of all signatories

Proof of residential address (not older than 3 months)

Company registration documents (if not already on file)

Timeframe: Coordinating diaries for all parties to sign is usually the most time-consuming part. Once the facility documents are signed:

The facility is typically activated the next working day.

You can start applying for guarantees immediately thereafter.

Apply For Facility Online

Apply Online

Applying For Individual Guarantees

Make sure you have a facility set up with us before proceeding with this process!

Timeframe: 2–4 working days from Employer’s approval to issuance (if all documents and payments are in order).

Step 1: Contact CivilSure

Once you have been awarded your contract, we will need the following:

Provide the Letter of Appointment (LOA) and full contract data.
CivilSure submits a tailored guarantee application to the guarantor.
Draft guarantee wording is prepared and reviewed by you and the Employer.
CivilSure negotiates any Employer-requested changes. Proof of accepance by employer to be sent thtough to CivilSure.

Step 2: Guarantee Issuance

Two invoices are issued:

- Premium invoice (Typically minimum R5,000 excl. VAT per guarantee)(Amounts based on the guarantee value, the facility rate – the amount you’ve been designated on your facility – and the duration of months for the project)
- Collateral invoice (refundable only once the guarantee is expired / returned; debit order options available for larger projects with a longer period. You pay 25% upfront and the rest you pay over the agreed amount of months on the contract ) – this is still your money, and is held investment account and earns interest.

Upon payment:

- - An electronic guarantee (PDF copy, sent via email) is sent (with contingency policy & tax invoice).
  - The original guarantee is couriered to you.

Step 3: Submission To Guarantor (Insurer)

Managing Your Guarantees

Reduce exposure (variable guarantees): Submit interim payment certificates, practical/final completion certificates to release capacity on your facility.
Extend: If you contract is taking longer than expected due to events outside of the contractor’s control (ie flooding, transportation strikes, etc), the guarantor will need to know the reason, likely ask you to submit latest progress reports and the guarantor may ask for Employer-approved extension letters (extension fees apply).
Returning a Guarantee/ Cancel: Based on the type of guarantee, it can expire either at a fixed expirey date, at practical completion or final payment certificate. The guarantor will need relevant certificates reflecting this. (It will either cancel at the expirey date or upon practical completion/ final payment, whichever comes sooner.)

w

Step 1 : Contact CivilSure Early

When: Ideally at tender stage, before contract award.

Why: We can issue a Letter of Intent to help you negotiate surety-style wording (less risky than on-demand guarantees).

How: Call us or complete our online enquiry form.

i

Step 2 : Gather Required Documentation

This is the most time-consuming part, but it only needs to be done once.

Once your facility is approved:

You won’t have to re-submit these documents unless there are changes to the facility agreement.The only exception is updated Annual Financial Statements (AFS), which are required each year at renewal.

What we need:

Company profile and organogram

Two years’ annual financial statements & latest management accounts

3 months’ bank statements

CIDB certificate & tax clearance certificate

Letter of appointment (if applicable)

Full contract data and guarantee wording required

Identity documents & tax numbers of all directors

Details of any existing guarantees, legal matters, or insolvency history

Tip: Disclose all material information upfront (e.g., cash-flow constraints, unusual project risks). Non-disclosure can result in declined facilities.



Step 3 : Submission To Guarantor (Insurer)

Once we receive your documents:

Civilsure prepares a comprehensive quote request for the guarantor, including:

A summary of your business and its background.

Your industry and project experience.

Motivations to secure the most competitive rates possible.

We then submit this to one of our trusted guarantors (e.g., PCBS, Lombard, Hollard).

What the guarantor may consider:

Your financial strength and liquidity (cash reserves, debt levels).

Current workload and contract commitments (to ensure you are not overextended).

Past performance and guarantee history (previous claims, call-ups, or defaults).

Strength of your balance sheet (assets that can be used as security if required).

Experience and qualifications of your directors and key staff.

The guarantor performs credit vetting and a full risk assessment before issuing a facility quote.

r

Step 3.1 : If the Insurer Declines or Attaches Subjectivities

If the insurer is unable to quote or attaches strict subjectivities (conditions):

Civilsure will review the feedback in detail with you.

We may request a meeting (in-person or online) to discuss potential solutions and the best way forward.

We may request additional security (e.g., property cessions, debtor book cessions, increased collateral) to strengthen the application.

We could approach alternative insurers or negotiate subjectivities to find a workable solution.

Minimum underwriting criteria:

Each insurer has certain baseline requirements (e.g., minimum turnover, minimum net asset value, or a clean financial history) that must be met for them to consider a facility.

If you do not meet these criteria, we will advise you on what can be improved to help you qualify in the future, or we will explore other options with you.

Additional timeframe: Negotiating subjectivities or alternative solutions can add up to an extra week to the facility approval process.

Our goal is always to secure your facility on the most favourable terms possible.

b

Step 4 : Facility Quotation

If your application is approved, the guarantor issues a facility quotation.

Important points to consider:

1. Securities:

Securities are the assets or commitments you sign over to the guarantor as part of the facility agreement. These can include:

Personal sureties by company directors

Company-to-company sureties if multiple entities are linked

Cession (pledging) of debtors’ books

Cession of property or other assets

These securities give the guarantor recourse if the guarantee is called.

As the client, you must review and ensure you are comfortable with the securities being used. Ask questions if you’re unsure.

2. Collateral:

Collateral is a cash deposit held by the guarantor as additional security for each guarantee issued.

Typically:

20% for conditional guarantees (surety wording)

40% for demand-type guarantees (on-demand wording)

Collateral is held in an interest-bearing account by the guarantor and remains your property.

It is invoiced per guarantee and can be refunded to you once the guarantee expires and no claims have been made. You may also elect to leave funds in the collateral account to use for future guarantees.

3. Premium Rate:

Premiums are based on the guarantee amount and duration:

3.5% (conditional guarantees)

4% (demand-type guarantees)

Minimum premium is R5,000 excl. VAT per guarantee.

Next step: If you accept the quotation:

You will sign it and return it to Civilsure so the official paperwork can be prepared.

We will then move to facility activation.



Step 5 : Facility Activation

The facility documents must be signed in front of an attorney (either the guarantor’s attorneys or a corresponding attorney of your choice).

Cost: Approximately R4,000 (payable directly to the attorney).

Who must be present:

All directors of the company

Trustees if a trust is involved

Any third-party sureties or company representatives who will be signing security documents

What to bring:

Original ID documents of all signatories

Proof of residential address (not older than 3 months)

Company registration documents (if not already on file)

Timeframe: Coordinating diaries for all parties to sign is usually the most time-consuming part. Once the facility documents are signed:

The facility is typically activated the next working day.

You can start applying for guarantees immediately thereafter.

Apply For Facility Online

Apply Online

Applying For Individual Guarantees

Make sure you have a facility set up with us before proceeding with this process!

Timeframe: 2–4 working days from Employer’s approval to issuance (if all documents and payments are in order).

Step 1: Contact CivilSure

Once you have been awarded your contract, we will need the following:

Provide the Letter of Appointment (LOA) and full contract data.
CivilSure submits a tailored guarantee application to the guarantor.
Draft guarantee wording is prepared and reviewed by you and the Employer.
CivilSure negotiates any Employer-requested changes. Proof of accepance by employer to be sent thtough to CivilSure.

Step 2: Guarantee Issuance

Two invoices are issued:

- Premium invoice (Typically minimum R5,000 excl. VAT per guarantee)(Amounts based on the guarantee value, the facility rate – the amount you’ve been designated on your facility – and the duration of months for the project)
- Collateral invoice (refundable only once the guarantee is expired / returned; debit order options available for larger projects with a longer period. You pay 25% upfront and the rest you pay over the agreed amount of months on the contract ) – this is still your money, and is held investment account and earns interest.

Upon payment:

- - An electronic guarantee (PDF copy, sent via email) is sent (with contingency policy & tax invoice).
  - The original guarantee is couriered to you.

Step 3: Submission To Guarantor (Insurer)

Managing Your Guarantees

Reduce exposure (variable guarantees): Submit interim payment certificates, practical/final completion certificates to release capacity on your facility.
Extend: If you contract is taking longer than expected due to events outside of the contractor’s control (ie flooding, transportation strikes, etc), the guarantor will need to know the reason, likely ask you to submit latest progress reports and the guarantor may ask for Employer-approved extension letters (extension fees apply).
Returning a Guarantee/ Cancel: Based on the type of guarantee, it can expire either at a fixed expirey date, at practical completion or final payment certificate. The guarantor will need relevant certificates reflecting this. (It will either cancel at the expirey date or upon practical completion/ final payment, whichever comes sooner.)

Apply For Individual Guarantees

Apply Online

Apply For Individual Guarantees

Apply Online