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Surety bonds are assumed to carry zero risk for the surety company. The bond outlines the agreement between the principal, surety company, and obligee. The bond does not include language on the principal's reimbursement to the surety, so how do they issue bonds without risk? This is where an indemnity agreement comes in. It is a contract used by surety companies to transfer risk from one party to another, with the indemnitor assuming the risk and the surety company being absolved of liability.
