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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 form does not include language about the principal's reimbursement to the surety. To confidently issue a surety bond, an indemnity agreement is crucial. An indemnity agreement is a contract used by surety companies to transfer risk from one party to another. In a surety bond indemnity agreement, the indemnitor assumes the risk, while the surety company is absolved of liability.
