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To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market.


1. The process of placing a new issue with investors. Underwriting involves the issuing company using one or (usually) more companies who are each responsible for placing a certain amount of the new issue. The underwriting firms contact potential investors to gauge interest and sell the issue. Underwriters guarantee the price for a certain number of shares of the new issue. See also: Bracketing, Oversubscribed, Undersubsribed.

2. Due diligence a lender conducts to ensure that a potential borrower is able to repay the loan.


To assume the risk of securities' sale by purchasing the securities from the issuer for resale to the public. Investment bankers often assume this underwriting function in order to guarantee that the issuer will receive all the funds needed from the sale. See also best-efforts basis, freed up, hot issue, investment banker, peg, standby underwriting.


(1) To evaluate the risk of a situation,as in loan underwriting to determine the borrower's financial strength,ability to repay the debt in the event of an interruption of cash flow,and willingness to repay the debt as evidenced by the borrower's credit score or credit history. (2) To guarantee a sale, such as an investment banker who underwrites the sale of securities and will purchase any that do not sell on the open market. (3) To assume liability, such as an insurance company that underwrites a policy.

References in periodicals archive ?
The firewall prohibiting lending to retail customers for securities purchases during the underwriting period addresses one of the most important potential conflicts of interests arising from the affiliation of commercial and investment banking: the possibility that a bank would extend credit at below-market rates to induce consumers to purchase securities underwritten by its section 20 affiliate.
Brown & Others Syndicate 702 has been renamed Markel Syndicate 702 at Lloyd's and is now underwritten by former Deputy Underwriter Andreas Loucaides.
SCOR also reiterates that the bulk of these additional reserves concerns business lines which have been clearly identified, which were underwritten between 1997 and 2001 and which the Group has stopped underwriting.
In the mid-market, particularly, you must be able to get a policy underwritten and issued fast.
Best believes that strict control of underwriting will be maintained in 2003, meeting the challenge of an increase of approximately 60% in premium volume resulting from 15% to 20% increases in rates and the absorption of capacity previously underwritten by syndicate 1003.
Alleghany, through its wholly-owned subsidiary, Alleghany Insurance Holdings LLC, has acquired RSUI, renewal rights to the ongoing business underwritten by RSUI for insurance affiliates of Royal & Sun Alliance and the related net unearned premium reserve portfolio of approximately $320 million.