Legal Definitions - underwrite

Definition: Underwrite means taking on financial risk in the hope of making a profit. It can refer to different types of financial investments, such as loans, insurance, and securities.

Examples:

• Loans: When someone lends money to another person, they are underwriting the risk that the borrower may not pay back the loan. The lender hopes to make a profit by charging interest on the loan.
• Insurance: Insurance companies underwrite the risk that their policyholders may suffer losses or damages. They hope to make a profit by charging premiums that are higher than the amount they pay out in claims.
• Securities: Investors may underwrite the risk of buying stocks or bonds, hoping that the value of these securities will increase over time and they can sell them for a profit.

These examples illustrate how underwriting involves taking on financial risk in the hope of making a profit. In each case, the investor or lender is willing to risk losing money in exchange for the possibility of earning a return on their investment.