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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. However, it typically does not mention the principal's reimbursement to the surety. This is where the indemnity agreement comes in. It is a two-party contract used to transfer risk from one party to another, with the principal assuming the risk and the surety company being absolved of liability.
