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Surety bonds are viewed as zero-risk for the issuing surety company. The bond outlines the terms between the principal, surety company, and obligee, specifying the payout amount if a claim is made. However, it often lacks language regarding the principal’s obligation to reimburse the surety. This is where an indemnity agreement comes into play, transferring risk through a two-party contract. In this agreement, the indemnitor (principal) assumes the risk, while the indemnity (surety company) is protected from liability. Indemnity agreements are crucial for surety bonds as they ensure the surety company can issue bonds with confidence, knowing they have a means of recourse.