underwrite

play
verb un·der·write \ˈən-də(r)-ˌrīt, ˌən-də(r)-ˈrīt\
Updated on: 26 Jul 2017

Definition of underwrite

underwrote

play \ˈən-də(r)-ˌrōt, ˌən-də(r)-ˈrōt\;

underwritten

play \ˈən-də(r)-ˌri-tən, ˌən-də(r)-ˈri-tən\;

underwriting

play \ˈən-də(r)-ˌrī-tiŋ, ˌən-də(r)-ˈrī-\
  1. transitive verb
  2. 1 :  to write under or at the end of something else

  3. 2 :  to set one's name to (an insurance policy) for the purpose of thereby becoming answerable for a designated loss or damage on consideration of receiving a premium percent :  insure on life or property; also :  to assume liability for (a sum or risk) as an insurer

  4. 3 :  to subscribe to :  agree to

  5. 4a :  to agree to purchase (something, such as security issue) usually on a fixed date at a fixed price with a view to public distributionb :  to guarantee financial support of underwrite a project

  6. intransitive verb
  7. :  to work as an underwriter

Examples of underwrite in a Sentence

  1. a university willing to underwrite an archaeological expedition

Recent Examples of underwrite from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'underwrite'. Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of underwrite

14th century


Financial Definition of UNDERWRITE

underwrite

What It Is

Underwriting is the process that a lender or other financial service uses to assess the creditworthiness or risk of a potential customer.

Underwriting also refers to an investment banker's process of packaging and selling a security on behalf of a client.

How It Works

Underwriting refers to the structured process used by financial service companies, such as banks, investors, or insurers, to determine and price the risk from a potential client.  The underwriting process is a detailed and systematic analysis of a potential borrower's credit-worthiness, including employment history, salary, financial statements and performance, publicly available information, and independent credit reports.  The underwriting process is intended to determine the credit needs, the quality of the collateral assets to be used to support the borrowing, and the borrower's ability to repay the debt.  Upon completion of a formal underwriting process and a summary presented to a credit committee within the lender, the lender will either approve or reject the request for a loan.

Similarly, an insurance company will evaluate the risks of a potential candidate for insurance, based on a variety of actuarial factors.  The bottom line from such an underwriting process is to price the insurance in accordance with its associated risk.

In securities trading, underwriting also includes assessing the risk and pricing the security accordingly.  However, the formal underwriting process also involves agreeing to buy the security (by the underwriter) and then selling the security for a profit.  The underwriter effectively takes a risk by agreeing to buy the security at the established price.  In most instances, underwriters will line up buyers for the securities before they take on the security, so that it can "flip" the security to the buyer immediately.

Why It Matters

Underwriting is a critical step in the credit analysis and risk pricing process for almost all financial service companies.  For companies, understanding the underwriting process and the requirements at each stage of the process will allow a company to prepare and present itself accordingly.  For investors, the information contained in an underwriting is crucial to understanding the risks and potential rewards from a security's underlying asset.


UNDERWRITE Defined for English Language Learners

underwrite

play
verb

Definition of underwrite for English Language Learners

  • : to give money to support (something, such as a new business) and agree to be responsible for any losses if it fails

  • : to agree to pay for a certain kind of loss or damage by offering (an insurance policy)

  • : to agree to buy (shares) that are not bought by investors when the shares are first offered for sale


Law Dictionary

underwrite

play
transitive verb un·der·write \ˈən-dər-ˌrīt, ˌən-dər-ˈrīt\

Legal Definition of underwrite

underwrote

\-ˌrōt, -ˈrōt\ play

underwritten

\-ˌrit-ən, -ˈrit-ən\ play

underwriting

  1. 1a :  to assume liability for (a risk) as an insurer the insurer underwrites individuals, not the group, in franchise health insurance b :  to issue or set the terms of (an insurance policy)

  2. 2 :  to agree to purchase (all or part of a security issue) usually on a fixed date at a fixed price with the purpose or plan to resell by means of a public offering was a security brokerage firm which as part of its business underwrote speculative new issues — UFITEC, S.A. v. Carter, 135 Cal. Rptr. 607 (1977)

  3. 3a :  to put up funds for or guarantee financial support of b :  to assess the risk of (as a loan)



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