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.
Underwriting means insuring.
An insurance company underwrites your policy when it agrees to take the risk of insuring your life or covering your medical expenses in exchange for the premium you pay.
An investment bank underwrites an initial public offering (IPO) or a bond issue when it buys the shares or bonds from the issuer and takes the risk of having to sell them to individual or institutional investors to recover its investment.
The process of making a final determination on approval or
rejection of a loan application.
Underwriting involves verifying the information that has been obtained from the borrower and that served as the basis for qualification, as well as assessing information on the applicant's credit worthiness.
What Does Underwriting Mean?
(1) The process employed by investment bankers to raise investment capital on behalf of a corporation. This is done mainly through stock offerings but also may be accomplished through selling bonds.
(2) The process of issuing insurance policies.
Investopedia explains Underwriting
The word “underwriter” is said to derive from the practice of having each risk taker write his or her name under the total amount of risk he or she was willing to accept at a specified premium (price). In a way, this is still true, as new issues usually are sold to the market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific allotment.Source: financial-dictionary.thefreedictionary.com