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Surety bonds are assumed to have zero risk for the company writing them. The bond outlines terms between the principal, surety company, and obligee. If a claim is filed, the surety pays on the principal's behalf. The bond typically doesn't address the principal reimbursing the surety. To issue bonds confidently, an indemnity agreement is crucial. It transfers risk from the principal to the surety company. The principal assumes the risk as the indemnitor, and the surety is absolved of liability as the indemnity.
