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Surety bonds carry zero risk for the surety company when issued. The bond outlines terms of agreement between principal, surety, and obligee. It does not include language on principal reimbursement to surety. Indemnity agreements are used to transfer risk in surety bonds. Indemnitor assumes risk, surety is absolved of liability. Indemnity agreements are crucial for surety companies to confidently issue bonds without expecting losses.
