To improve underwriting, what may a surety require from its principal?

A surety may require a deposit of collateral security to improve underwriting because it provides a tangible asset that can be accessed in case the principal fails to fulfill their obligations. This requirement helps mitigate the risk the surety undertakes when issuing a bond. By securing a portion of the bond amount in collateral, the surety ensures that there are resources available for potential claims, thereby enhancing the overall stability and reliability of the bond.

Collateral security serves as a form of guarantee that the principal is serious about their commitments and offers a level of financial backing that can reassure the surety. It helps the surety manage the risk associated with issuing bonds, especially if the principal's financial situation or creditworthiness is in question.

While factors like proof of credit score, verification of past performance, and letters of recommendation can influence the underwriting process, they do not provide the same direct financial assurance as collateral. These aspects can improve the overall assessment of a principal's reliability but do not equate to the security offered through collateral, making it a critical component for sureties looking to minimize their risk exposure.