Indemnification: (1) In policies written on an indemnity basis, the insurer reimburses the insured insurer for claims and claims costs already paid by the insured. The technically insured person must not only bear the loss, but also pay the loss before the insurer compensates for the loss. (2) An agreement by one party to assume financial responsibility for the liability of another party. Indemnity agreements are commonly used to impose such a transfer of risk.