Surety:
A Surety is the company that accepts the immediate financial responsibility to the obligee in a surety bond agreement. In instances where a claim is made on a bond, the surety is the party responsible to compensate the obligee or remedy the situation with respect to the bond penalty.
A surety is a business entity similar to an insurance company and sometimes a division of an insurance company. When approached with a bond request, the surety will underwrite the request to assess risk. If the risk is within that surety's tolerance thresholds, the surety will present a quote for the bond.
A surety differs from an insurance company in the fact that, in the case of claims, the surety will seek to recover the financial expense incurred from settling claims. The surety will work to recoup the incurred losses by attempting to collect from the principal on the bond, the party with the obligation to fulfill to the obligee. The surety has the immediate financial responsibility to the obligee while the principal is ultimately financially responsible to the surety for potential losses incurred by the surety due to settling claims on the bond.
