Cover for your vehicle and the people you share the road with
When you tender for or win a contract, the project owner often asks for a bond to show that you will keep your commitments. Kalkaal can issue bid, performance and advance payment bonds on your behalf, structured under Kafalah, the Islamic contract of guarantee, subject to the approval of Kalkaal's Shariah Supervisory Board.
Under Kafalah, Kalkaal stands as guarantor to the project owner. If you do not meet your obligation and a valid demand is made, Kalkaal pays the project owner up to the bond amount, and you then repay Kalkaal. A bond supports your obligations; it does not cover your own losses.
To get started, send an enquiry. A Kalkaal advisor explains the bond terms, any security required and the fee before you decide.
Why this cover
- Bonds structured under Kafalah, subject to Shariah Supervisory Board approval
- Can reduce the need to tie up cash as a deposit when you tender
- Bid, performance and advance payment bonds arranged in one place
- Clear terms on security and repayment before any bond is issued
Your contribution What you pay for your cover. Part of it is Tabarru’ to the shared fund.Glossary goes into a shared fund that pays eligible claims; Kalkaal manages the fund for a disclosed Wakala Agency: participants appoint Kalkaal to manage the fund for an agreed fee, disclosed in your quotation and schedule.Glossary fee.
Cover options
Bid Bond (Kafalah)
Supports your tender by guaranteeing that, if you win, you will sign the contract and provide any performance bond required.
Performance Bond (Kafalah)
Guarantees to the project owner that you will complete the contract as agreed. If you default, Kalkaal pays up to the bond amount.
Advance Payment Bond (Kafalah)
Secures an advance the project owner pays you at the start of a contract. The amount guaranteed usually falls as the advance is recovered through the work.
What’s covered
- Bid bonds that support your tender and show you will sign the contract if you win
- Performance bonds that secure your obligation to complete the contract as agreed
- Advance payment bonds that secure an advance the project owner pays you
- Contracts for construction works and for the supply of goods and services
- Bonds in the form and wording required by the project owner, where Kalkaal accepts it
- Bonds for public and private sector project owners
Not covered and conditions
- A bond is not cover for your own losses: you repay Kalkaal any amount it pays under the bond
- Contracts for activities that are not Shariah-compliant
- Obligations that involve interest
- Changes to bond wording that Kalkaal has not agreed in writing
- Demands made after the bond's expiry date
- Every bond is subject to Kalkaal's assessment and any security it asks for
- Full exclusions, waiting periods and deductibles are set out in your quotation and policy wording.
ClaimsHow claims work
How to claim
A bond claim is made by the project owner named in the bond, not by the contractor.
- Project owners: send a written demand to Kalkaal before the bond's expiry date, in the form and with the documents the bond requires.
- Contractors: tell Kalkaal straight away if the project owner warns of a default or a dispute, and keep all contract correspondence. If Kalkaal pays under a bond, you repay Kalkaal as agreed when it was issued.
Documents you will usually need
- Written demand from the project owner, signed by an authorised person
- The original bond, or a copy if the bond allows
- A statement of the contractor's default, where the bond requires one
- The underlying contract and relevant correspondence
- Evidence of the advance paid and the amount recovered, for advance payment bonds
- Notice of contract termination, where relevant
What you’ll need for a quote
- The tender documents or signed contract, including the required bond wording
- Business registration and trade licence
- Audited financial statements for recent years
- A list of similar contracts you have completed and those in progress
- Recent bank statements
- The project owner's name, and the bond amount and period required
- Details of the security you can offer
FAQs
What is Kafalah?
Kafalah is the Islamic contract of guarantee. One party, the guarantor, takes on responsibility for another party's obligation to a third party. In a bond, Kalkaal acts as guarantor to the project owner for your obligations under the tender or contract. Kalkaal's bonds are structured under Kafalah, subject to the approval of its Shariah Supervisory Board.
If Kalkaal pays under a bond, do I have to repay it?
Yes. A bond guarantees your obligations; it is not cover for your own losses. If Kalkaal pays the project owner under a valid demand, you repay Kalkaal the amount paid, as agreed in the counter-indemnity you sign before the bond is issued. Kalkaal may also ask for security before it issues a bond.
What happens to my bid bond if I win the contract?
A bid bond usually ends when you sign the contract and provide any performance bond or advance payment bond the project owner requires. If you do not win, the bid bond ends on its expiry date or when the project owner releases it. The tender documents set out the exact conditions.
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