Underwriting

Underwriting is the evaluation of an applicant, asset, or transaction to decide whether to accept its risk and on what terms. It is used in insurance, lending, and securities issuance.

Risk assessment: The process of identifying and estimating the likelihood and impact of potential losses. Underwriters assess likely losses before accepting an applicant or transaction.
Insurance: A contract that transfers specified financial risks from an insured party to an insurer in exchange for payment. Insurance underwriting decides which risks the insurer will cover and at what price.
Claims adjustment: The investigation and valuation of an insurance claim to determine whether and how much the policy pays. Underwriting evaluates risk before coverage; claims adjustment handles losses after they occur.
Insurance availability: The extent to which insurance coverage can be obtained for a particular person, property, or risk. Eligibility rules determine which applicants can obtain coverage.
Actuarial science: The use of mathematics and statistics to analyze financial risks, especially those involving insurance and pensions. Insurers use actuarial estimates to inform underwriting prices and eligibility.
Mortgage loan: A loan secured by real estate, usually repaid through scheduled installments over an agreed term. Mortgage underwriting evaluates the borrower, property, and loan structure.
Risk retention: The deliberate decision to bear a potential loss rather than transfer it to another party. An organization may retain risk instead of seeking insurance underwriting and coverage.
Insurance affordability: The degree to which insurance premiums are manageable relative to a policyholder's resources. Risk-based pricing can make coverage costly for applicants with elevated risks.
Credit scoring: The statistical assessment of a borrower's creditworthiness using information about credit history and other characteristics. Lenders often use scores as one input when evaluating applications.
Commercial lending: The provision of loans and credit facilities to businesses and other organizations. Lenders underwrite a company's finances, repayment capacity, and collateral.

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