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When surety bonds are issued, they 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 reimbursement to the surety. This is where an indemnity agreement comes in. An indemnity agreement transfers risk from one party to another, with the indemnitor assuming the risk and the indemnity being absolved of liability. In the context of surety bonds, the indemnity agreement is crucial for the surety company to confidently issue bonds without expecting to suffer any losses.
