Underwrite

What Does Underwrite Mean?

In insurance, the term underwrite has two distinct meanings. First, it refers to the process of assessing, pricing, and evaluating insurance or reinsurance risks (perils) to determine whether they are acceptable. Second, it denotes the acceptance of liability or the obligation to compensate the insured or reassured for an agreed amount, as specified in the insurance contract.

Insuranceopedia Explains Underwrite

Underwriting involves gathering and evaluating information to ensure a profitable portfolio for the firm and its stakeholders. An insurance company with extensive underwriting data gains a competitive advantage, as maintaining a comprehensive database helps the insurer remain industry-leading, even as underwriting cycles fluctuate.

Additionally, underwriting can refer to the act of insuring an entity. This involves accepting the liability for compensation in exchange for premiums. Simply put, when an individual or company agrees to assume risks on behalf of another party in return for payment, it is known as underwriting.