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Surety bonds are issued under the assumption of zero risk for the surety company, outlining the agreement between the principal, the surety, and the obligee, including payout amounts for claims. However, they typically lack clauses for the principal's reimbursement to the surety. This is where indemnity agreements come into play. An indemnity agreement is a two-party contract that transfers risk from one party (indemnitor or principal) to another (indemnity or surety company). This mechanism ensures that the surety can issue bonds confidently, with the indemnitor assuming the risk and absolving the surety of liability.
