An underwriter is one of the fundamental business processes in the insurance, stock market and banking sectors. Depending on the level of efficiency, whether the company will be profitable or not. A specialist who assesses the risk of insuring objects (house, apartment, car, etc.), makes forecasts of the occurrence of different situations and calculates these insurance payments is called an underwriter.
The 2008-2009 global financial crisis presented new challenges for banks and insurance companies. In December 2010, the Basel Committee responded by issuing an agreement called Basel III. The recommendations contained therein speak of the need for a broad development of a specialized risk management system. That should help keep the liquidity ratio from collapsing.
Underwriters are an integral part of risk management. Its growing demand in the banking industry is due to its adherence to Basel III and the desire of institutional owners to control risks and manage them competently.
The concept of "underwriting" in economics is quite broad. It covers 3 areas at once:
It is the underwriter who assesses all possible risks, thinking about as many different situations as possible so that the calculation of insurance payments is correct. the financial health of a company or organization is directly dependent on the quality of its work. The underwriter is actually a representative of the insurance company's interests.
- banking sector;
- stock market;
Underwriter On the stock market
Underwriters in the stock market involve managing the issuance of shares, bonds and other securities, and their distribution. This can be done by all syndicates, which consist of several corporate and bank investors. Made for a short time. Its main purpose is to ensure the sale of new securities at the price specified in the original deal documents. This syndicate is headed by the main guarantor. Her responsibilities include administering a list of securities on the stock market, contacting the issuer and keeping records of stocks, bonds, options, notes and other securities.
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Underwriter In the banking sector
The client comes to the bank and asks for a loan. The bank employee enters the requested amount and the client's personal data into a special program and asks him to wait a little. "Banks have to make decisions," he explained. What happened at this time? The bank assesses how likely it is that the client will return the borrowed funds. This scoring procedure is called an Underwriter.
The assessment is based on two parameters, the borrower's solvency and credit history. The procedures for implementing the procedures at each bank are individual. A positive outcome is a decision that benefits the client. Negative impact will result in refusal to issue credit funds. In some cases, the bank will compromise. He can "give permission" for a loan. However, the amount and conditions are determined by the bank, not in accordance with the wishes of the borrower.
Underwriters In the insurance sector In the insurance
sector, Underwriters include:
In this case, an underwriter is a person who is authorized by the insurance company to analyze, make decisions on insurance or reinsurance, and classify risks in order to calculate an adequate payment for them. It is he who forms the insurance or reinsurance portfolio. In order to determine the true level of risk, determine the amount of compensation and correctly write down the terms of the contract, it requires the appropriate knowledge and experience.
- Analysis of possible risks.
- Make individual decisions about insurance for specific risks.
- Determination of rates, as well as insurance provisions that are fully in accordance with certain risks.