When underwriting a surety bond, what does the surety primarily rely on?

In the underwriting process of a surety bond, the surety primarily relies on the reimbursement from the principal. The principal is the party that purchases the bond and is responsible for fulfilling the obligations outlined in the bond agreement. When a claim arises due to the principal's failure to meet these obligations, the surety will initially pay out on the bond to satisfy that claim. However, it is the expectation of reimbursement from the principal that ensures the surety can recover the amount paid.

This reliance on reimbursement underscores the importance of the principal's creditworthiness and financial stability during the underwriting assessment. The surety thoroughly evaluates the principal's capability to fulfill their obligations not only to mitigate risks but also to ensure they are adequately compensated for any losses incurred. The surety's ultimate goal is to bond with a principal who is financially sound and reliable, as this enhances the likelihood of successful reimbursement in the event of a claim.