Which of the following is a fundamental principle of bond underwriting?

The fundamental principle of bond underwriting is that risk must be identifiable. This principle emphasizes the importance of assessing and understanding the risks associated with insuring a bond. Underwriters evaluate various factors that contribute to the likelihood of loss, including the creditworthiness of the issuer, the purpose of the bond, economic conditions, and other relevant risk metrics. Identifying the risk allows underwriters to make informed decisions about whether to issue the bond and under what terms, thereby safeguarding the interests of both the insurer and the insured.

Affordability is important in insurance offerings but does not directly pertain to the underwriter's analysis of risk associated with bonds. Minimizing claims is a goal of the insurance process in general, but it does not address the key principle of underwriting bonds specifically. The idea that all applicants are equal is contrary to the underwriting profession's standard practice since each application is evaluated on its own merits and potential risks. Hence, the identification of risk is crucial for effective underwriting in bond markets.