Underwriting

The term “underwriting” denotes the act of pledging liability for the risks attached to an agreement.

This practice is common in insurance, where insurance policies are underwritten by an insurance company or a reinsurance provider. This is known as insurance underwriting.

Loan underwriting is usually carried out by banks which accept liability for losses resulting from bad debts.

Brokers, such as investment banks, may underwrite securities and in so doing accept responsibility to insure that investors receive the money owed. This is known as securities underwriting.

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