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Underwriting
 

 

The business of insuring against risk. An underwriter in return for a commission or premium agrees to bear a risk or a proportion of a risk. Specifically, an underwriter is a member of Lloyds, who joins with others to underwrite the risk of damage or loss to a ship or cargo - if the ship sinks and is not recoverable he will pay a proportion of the cost of the loss to the insured - but the term is generally used to describe the basic activity of insurance. An issuing house also underwrites directly or indirectly a new issue of shares - if the public do not take up the whole issue, the balance will be taken up by the underwriters.

Reference: The Penguin Dictionary of Economics, 3rd edt.