In a surety bond, who is required by the Indemnity Agreement to cover any loss?

In the context of a surety bond, the Principal is the party who is primarily responsible for fulfilling the obligation specified in the bond. When an Indemnity Agreement is in place, it stipulates that the Principal must reimburse the Surety for any losses incurred as a result of the Principal's failure to meet its obligations.

If a claim is made against the bond due to the Principal's default, the Surety will step in to fulfill the obligation (such as paying damages or completing a contract) to protect the Obligee, who is the party to whom the obligation is owed. However, since the Surety is essentially providing a guarantee for the Principal's performance, the Indemnity Agreement shifts the financial responsibility for any losses back to the Principal. This means that the Principal is obligated to reimburse the Surety for any amounts the Surety pays out under the bond. Thus, the Principal is the correct answer in this scenario, as they are contractually bound to cover any losses stemming from their own failure to comply with the terms of the agreement that the bond supports.