Underwriter

MoneyBestPal Team
2 minute read
A person or organization that assesses the risk and viability of a financial transaction, such the issuance of a loan, insurance policy, or security.
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An underwriter is a person or organization that assesses the risk and viability of a financial transaction, such as the issuance of a loan, insurance policy, or security. 


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The underwriter establishes the terms and circumstances of the transaction and serves as an intermediary between the issuer and the purchaser of the financial product.

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The role of an underwriter varies depending on the type of financial product. For example:
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  • In lending, an underwriter reviews the creditworthiness and repayment ability of a borrower and decides whether to approve or reject a loan application.
  • In insurance, an underwriter assesses the likelihood and severity of a potential loss from an insured event and sets the premium and coverage amount for an insurance policy.
  • In securities, an underwriter helps a company or a government raise capital by buying securities (such as stocks or bonds) and selling them to investors.

In exchange for a fee or commission, an underwriter takes on a certain amount of risk. Losses could be incurred by the underwriter if the financial transaction turns out to be unprofitable or defaults. Hence, before deciding to accept a financial transaction, an underwriter conducts research and analysis.
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