Collateral agreement

{
  "id": "MLC-T-INS-000813",
  "term": "Collateral agreement",
  "field": "Insurance and risk management",
  "definition": "A contract in which a party pledges assets to a surety or insurer to secure its performance of an underlying obligation, such as completing a construction project covered by a performance bond. If the principal defaults on the primary obligation, the surety can seize and liquidate the pledged collateral to cover any losses incurred from paying a claim on the bond. The agreement specifies the conditions for holding, releasing, or liquidating the assets.",
  "url": "https://mlchart.com/terminology/insurance/collateral-agreement/"
}