The world we live in is full of risks. We have to constantly analyze the risk appetite of companies so that they can survive in this dynamic atmosphere. Therefore, we need people who can effectively analyze these risks and come up with solutions to avoid risk.
This risk can arise from different functions of a company including sales, etc. Finance has become a very important area because companies today have completely changed the way they deal with money. This domain is not free from risks. Financial risks envelop organizations in a way that only experts can handle those kinds of risks.
Who are Underwriters?
An underwriter plays a very important role in any organization, especially in financial organizations. All companies have certain risks involved in their operations. An underwriter comes to your rescue. He is a person or a party who takes up and handles the risks associated with any company in exchange for some fee. This fee is called the commission which applies to all kinds of services provided by an underwriter.
The finance domain considers underwriting a critical function as underwriters are at the helm of affairs when it comes to mortgages, insurances, debt, equity, bonds, financial instruments etc. To become an underwriter, you can take up an underwriting course to understand the nuances of the subject and the kind of work underwriters do.
Types of Underwriters
Underwriters manage the risks of a particular area in finance where they are subject matter experts. Different underwriters come from different areas of expertise. Some of the types of underwriters are mentioned below:
- Mortgage Underwriters: They check if the applicant or the borrower meets all of the requirements before giving them the loan amount. To be precise, they analyse the creditworthiness of a borrower. They are the final approvers of any kind of credit given to individuals and organisations
- Insurance Underwriters: They analyse risks associated with different insurance policies. They review insurance applications and then decide on the premium amounts to be paid based on the risk appetite of the individual.
- Debt Underwriters: These people also purchase securities on behalf of different companies. The motive of such a purchase is to sell these securities later at a profit.
- Equity Underwriters: Underwriters also manage the distribution of equity shares. They also have a major role to play in the entire IPO process. This includes selling of shares for the very first time in the stock market
You can take up an underwriting course to understand your interests.
What Functions Does an Underwriter Perform?
An underwriter is an expert when it comes to analysing the risks associated with different financial functions or with an upcoming deal or proposal. They help out lenders in formulating their plan of action. He also performs the following functions:
- He looks into the credit history of an individual or a company who is looking forward to borrowing some money. They use different analysing techniques to check the credit score and any major defaults associated with that particular person.
- He would also take care of the income statements and any other proofs required.
- An underwriter also calculates different ratios to ascertain the financial position of a company. These ratios help him in understanding the risk profile in a better way.
- Some of the underwriters also take care of the asset management functions. As their main job is to analyze potential risks and come up with solutions to minimize the risk, it becomes important for them to handle the areas which can impact finances.
Underwriters play a very important role in today's financial world. You can also call him an expert in finance who takes care of everything.