Simple English definitions for legal terms
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Underwriting is when someone agrees to take on the risk of insuring something, like a person's life or a piece of property. It can also refer to when someone agrees to buy a portion of a new investment that is being offered to the public.
Definition: Underwriting is the process of taking on a risk by providing insurance coverage for it. This can include insuring things like property or a person's life. It can also refer to the act of agreeing to purchase all or part of a new issue of securities that will be offered for sale to the public.
Examples:
The examples illustrate how underwriting involves assuming a risk and providing financial protection against potential losses. In the case of insurance, the underwriter is taking on the risk of having to pay out a claim if something goes wrong. In the case of securities underwriting, the underwriter is taking on the risk of having to hold onto securities that may not sell as well as expected.