Question

How does the value of the indemnity agreement change for the indemnitee, when the indemnitor lacks sufficient assets to pay on a claim.  

Answer 1

Contractual indemnities usually become worthless if the indemnitor does not sufficient assets to pay for the indemnity. When the indemnitor has no assets or when the indemnitor becomes bankrupt then the indemnity becomes meaningless.

To prevent from this scenario of the indemnity becoming meaningless the indemnitee should put an additional requirement in the contract that the indemnitor obtains insurance coverage for the indemnitee. When this is done the indemnitee will have an alternative source of recovery for the concerned claims.