What is the purpose of letter of indemnity?

A letter of indemnity, in simple terms:

• Is sent to a 2nd party, to set an agreement
• That the 1st party (the one that sends the letter) OR both parties
• Is/are protected by: the losses, damages risks, liabilities, vulnerabilities, etc that may come up as part of the agreement

To put it another way: a letter of indemnity is there to protect one/both parties in an event in which a breach/delinquency takes place.