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Surety bonds are issued with zero risk assumed by the surety company. The bond outlines terms between the principal, surety company, and obligee, stating the surety pays out on the principal's behalf if a claim is filed. An indemnity agreement transfers risk from the principal to the surety company. In this agreement, the principal is the indemnitor assuming risk, while the surety company is the indemnitee absolved of liability. This agreement is crucial for surety companies to confidently issue bonds without anticipating losses.
