Knowing Your Obligations Under the Deed of Indemnity

When arranging a surety bond, one of the most important and often misunderstood documents you’ll encounter is the Deed of Indemnity. Understanding what it is and what it means for your business is essential before any bond is issued.

This guide explains the key obligations under a Deed of Indemnity and how DRS can help you navigate them with confidence.

What Is a Deed of Indemnity?

A Deed of Indemnity is a legally binding agreement between your business (and often other group companies on a joint and several basis) and the surety provider. In simple terms, it confirms that you will reimburse the surety for any loss, cost, or expense they incur if a claim or demand is made under a bond. While the bond protects the beneficiary, the Deed of Indemnity protects the surety.

Who Usually Signs the Deed?

Depending on the structure and strength of the business, the Deed of Indemnity is usually signed by the contracting company, parent companies and wider subsidiary companies. The parties required will depend on the risk profile, financial position, and size of the bond. DRS’ role is to negotiate proportionate and appropriate indemnity arrangements, avoiding unnecessary exposure where possible.

Key Obligations You Should Be Aware Of

1. Full Reimbursement of Losses

If the surety pays out under a bond, you are obliged to repay the claimed amount, legal and professional costs, investigation and enforcement expenses.  This obligation usually applies on demand, even if the underlying dispute is ongoing.

2. Providing Information and Cooperation

Most deeds require you to provide accurate and timely information, notify the surety of potential claims or disputes & cooperate fully in managing or defending a claim. Failure to do so can be a breach of the deed of indemnity, which can result in the surety requesting cash (on-demand) for all bond exposure outstanding at the time.

3. Payment of premiums, including additional premiums

Non-payment of premiums (including additional premiums) within agreed timeframe can result in a breach of the deed of indemnity, giving the surety the right to request cash (on-demand) for all bond exposure outstanding at the time. 

4. Payment on-demand for all outstanding bond exposure should any of the following occur:

a. If any named indemnitor suffers an insolvency event.

b. If there is a change in the ultimate control of any of the indemnitors, without the surety’s consent.

Why Professional Advice Matters

Deeds of Indemnity are standard documents, but they are not all the same. Subtle differences in wording can significantly affect risk and liability. With vast experience, DRS can:

• Explain obligations in clear, practical terms

• Highlight key risks and red flags

• Liaise with sureties on wording concerns

• Ensure indemnities are proportionate to the bond

• 
  

This support allows you to proceed with clarity, not uncertainty. Surety is built on trust, transparency, and performance and DRS can help you manage all three.

If you need support in managing your bonding pipeline, please get in touch and we will be happy to help.