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Surety bonds carry zero risk for the surety company when issued, as outlined in the bond agreement between the principal, surety company, and obligee. However, the bond form typically lacks language about the principal reimbursing the surety. To confidently issue bonds without loss, an indemnity agreement is crucial. This two-party contract transfers risk from the principal to the surety company. The indemnitor assumes risk, while the surety is absolved of liability, ensuring the bond's integrity.
