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When surety bonds are issued, they are considered to carry zero risk for the surety company. The bond outlines the agreement among the principal, the surety, and the obligee, detailing the potential payout if a claim is made. However, the bond typically lacks mentions of the principal's obligation to reimburse the surety. Thus, the surety company relies on an indemnity agreement to mitigate risk. This two-party contract facilitates the transfer of risk from the indemnitor (the principal) to the indemnity (the surety company). In the context of surety bonds, this agreement is crucial to ensure the surety is not liable for losses incurred.