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When surety bonds are issued, they are assumed to carry zero risk for the surety company, with the bond outlining the terms of the agreement. However, the bond form usually does not address the principal's reimbursement. This is where an indemnity agreement comes in. An indemnity agreement is a two-party contract used by surety companies to transfer risk, with the indemnitor assuming the risk and the surety company being absolved of liability.
