If all parties to the three-party surety agreement perform as they should, there should be no losses. One final difference between insurance and surety is the actual obligations of the principals. Insurance is a deal to transfer risk of expected losses in exchange for a fixed premium. The premium for bonds is only intended to rent the financial standing of the surety, not to pay losses. Insurance carriers have no recourse.
Sureties do have recourse.
This relationship and responsibility is outlined in an indemnity agreement that the principal must sign prior to the surety releasing any bonds to obligees on behalf of the principal. This contractual obligation states that the principal is liable for all losses, costs, and attorneys fees resulting from the principal's default under the contract with the obligee. Click on the links to see the list of Surety Products we offer. To Surety Products page To list of terms above Fidelity Bonds While called bonds, these obligations to protect an employer from employee-dishonesty losses are really insurance policies. These insurance policies protect from losses of company monies, securities, and other property from employees who have a manifest intent to cause the company loss.