Perfected Indemnity: Why Surety Companies Require Trusts and Spouses to Indemnify

Sureties’ insistence on obtaining indemnity from trusts and spouses is rooted in their need to manage risk and ensure they can fulfill their obligations without undue financial strain. A principal willing to provide perfected indemnity, including indemnification of all owners, provides reassurance to the surety that the principal is confident and committed to their bonded obligations with “skin in the game”. Surety is a credit product for principals and the surety company expects to be reimbursed for any claims paid out, securing this promise through an indemnity agreement. Here are some of the primary reasons for perfected indemnity:  → Asset Accessibility: One of the main concerns for sureties is ensuring they have access to sufficient assets to recover any losses should the principal default on their obligations. Assets that are held in trusts or under a spouse’s name might be shielded from claims, making it difficult for the surety to recover amounts they’ve paid on behalf of the principal. By obtaining indemnity from these entities, sureties have broader access to assets for recovery. → Preventing Asset Transfers: It’s not uncommon for individuals or businesses to transfer assets strategically to trusts or spouses, especially when they foresee potential financial challenges. By securing indemnity upfront, sureties can deter such transfers, ensuring that the principal’s financial strength remains intact, and recovery remains feasible. → Holistic Financial Picture: Sureties underwrite bonds based on an assessment of the principal’s ability to meet obligations. This assessment is more accurate when all assets, including those in trusts or with spouses, are considered. It provides a complete understanding of the principal’s net worth and financial health. → Legal Clarity: Perfecting indemnity minimizes legal ambiguities down the road. It clearly defines surety’s rights and provides a more straightforward path to recovery if needed. → Risk Management: From the surety’s perspective, the more avenues available for recovery, the lower their risk. By including trusts and spouses in the indemnification process, sureties effectively spread and mitigate the risk associated with the bond. → Reinforcing Commitment: When trusts and spouses are involved in the indemnity process, it often signals a higher level of commitment from the principal’s side. It showcases that the principal is confident in their ability to meet the bond’s obligations, as their personal and trust assets are on the line.   In summary, sureties’ focus on obtaining indemnity from trusts and spouses revolves around risk management, ensuring asset accessibility, and promoting a stronger commitment from the principal.   Our team at Parrot Surety Services is here for all of your surety bond needs and questions. Contact any member of our team for dedicated surety expertise and support!

Sureties’ insistence on obtaining indemnity from trusts and spouses is rooted in their need to manage risk and ensure they can fulfill their obligations without undue financial strain. A principal willing to provide perfected indemnity, including indemnification of all owners, provides reassurance to the surety that the principal is confident and committed to their bonded obligations with “skin in the game”. Surety is a credit product for principals and the surety company expects to be reimbursed for any claims paid out, securing this promise through an indemnity agreement. Here are some of the primary reasons for perfected indemnity:  → Asset Accessibility: One of the main concerns for sureties is ensuring they have access to sufficient assets to recover any losses should the principal default on their obligations. Assets that are held in trusts or under a spouse’s name might be shielded from claims, making it difficult for the surety to recover amounts they’ve paid on behalf of the principal. By obtaining indemnity from these entities, sureties have broader access to assets for recovery. → Preventing Asset Transfers: It’s not uncommon for individuals or businesses to transfer assets strategically to trusts or spouses, especially when they foresee potential financial challenges. By securing indemnity upfront, sureties can deter such transfers, ensuring that the principal’s financial strength remains intact, and recovery remains feasible. → Holistic Financial Picture: Sureties underwrite bonds based on an assessment of the principal’s ability to meet obligations. This assessment is more accurate when all assets, including those in trusts or with spouses, are considered. It provides a complete understanding of the principal’s net worth and financial health. → Legal Clarity: Perfecting indemnity minimizes legal ambiguities down the road. It clearly defines surety’s rights and provides a more straightforward path to recovery if needed. → Risk Management: From the surety’s perspective, the more avenues available for recovery, the lower their risk. By including trusts and spouses in the indemnification process, sureties effectively spread and mitigate the risk associated with the bond. → Reinforcing Commitment: When trusts and spouses are involved in the indemnity process, it often signals a higher level of commitment from the principal’s side. It showcases that the principal is confident in their ability to meet the bond’s obligations, as their personal and trust assets are on the line.   In summary, sureties’ focus on obtaining indemnity from trusts and spouses revolves around risk management, ensuring asset accessibility, and promoting a stronger commitment from the principal.   Our team at Parrot Surety Services is here for all of your surety bond needs and questions. Contact any member of our team for dedicated surety expertise and support!