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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. However, it typically does not include language about the principal reimbursing the surety. This is where an indemnity agreement is important. An indemnity agreement transfers risk from the indemnitor (principal) to the indemnity (surety company). It allows the surety company to issue bonds confidently without expecting any loss.
