Fidelity and Surety Bonds
A special class of risk transfer device, and strictly speaking are not contracts of insurance. Agreement by one party, the “surety,” to answer to a third person, the “obligee,” for the obligation of a party called the “principal.”
• If the principal fails to perform in the manner guaranteed, the surety will be responsible to the obligee.
• The surety is analogous to the cosigner of a note and like a cosigner, is responsible for the obligation if the principal defaults.