INSURANCE

CONTENT

1. Underwriting and Reinsurance
2. Types of Risks
3. Terms Frequently Used in the Insurance Industry
4. The Importance of Insurance

Meaning of Underwriting

Underwriting is the process of measuring risk exposure and determining the premium that needs to be charged to insure the risk. It also means an undertaking to compensate an insured for a risk or part of the risk. This is common in marine insurance because of the enormous cost involved which cannot be borne by one insurance company.

Underwriter is a marine insurer who offers to cover, underwrite or assume a portion of a risk. The underwriter would write under the details of the risk, his name and the proportion he has accepted. A very good example is the Lloyd Underwriter, an association of London underwriters incorporated in 1871 by Edward Lloyds. They are organized in syndicates that undertake a fraction of the risks brought to them by the agent of the shippers. Lloyd’s underwriter is not a corporation, but it provides facilities to members to transact business and is not responsible for losses incurred by the underwriter.