What Does Underwrite Mean?
Underwrite in insurance has two varying meanings. First, it is the process of defining, pricing, and evaluating insurance and reinsurance perils (risks) and concluding whether they are acceptable or not. Secondly, the term refers to the acceptance of liability or obligation to compensate the reassured or the insured an agreed amount as per the insurance contract.
Insuranceopedia Explains Underwrite
To underwrite involves information gathering and evaluation to maintain a profitable book for the firm and the stakeholders. An insurance firm with a broad range of underwriting information will gain a competitive edge. Maintaining a broad range of such a database enables any insurer to be at the helm of the industry, even if the underwriting cycle changes.
Second, to underwrite can also refer to insuring an entity. This is accepting others' liability for compensation known as premiums. Simply explained, when an individual or a company agrees to cover risks for another in exchange for money, this is to underwrite.