Who is an underwriter?
- An underwriter, sometimes known as book runner, is an individual or entity that evaluates and assumes another party's risk for a payment.
- This payment takes the form of a commission, premium, spread, or interest.
- Underwriters determine the level of the risk for lenders.
- They are critical to the mortgage industry, equity markets, insurance industry, and common types of debt security trading due to their ability to ascertain risk.
Role of an underwriter?
- Investors rely on underwriters to determine if a business risk is worth taking.
- Underwriters also contribute to sales-type activities during an Initial Public Offer.
- He or she also has the job of determining the likelihood that a policyholder will submit a claim, in case of an insurance contract.
Types of underwriters
- Mortgage underwriters
- Insurance underwriters
- Equity underwriters
- Debt security underwriters
What is the difference between underwriters and agents/ brokers?
Underwriter
- Underwriters assess, evaluate, and assume risk on behalf of other parties.
- They solely represent the interests of the company they work for.
- They hold the final say on whether to assume risk or not.
