What is an indemnity?

An indemnity is a promise by one party to protect another party from, or to reimburse that party for, loss or damage suffered, or any expense incurred on the occurrence of a specified event.  The event may, but need not, include a breach of contract or some other legal duty by the indemnifying party.  For example, an indemnity may require a party to compensate another party on the happening of an external event such as a fall in the exchange rate.