Underwriting Risk

Underwriting risk refers to the possibility that an insurance company might face greater financial losses than expected from the policies it has issued. This can happen if claims cost more than predicted, perhaps due to unforeseen circumstances or incorrect assumptions during the insurance approval process. Essentially, it’s the risk that the insurer will pay out more in claims than the premiums collected, which can impact the company's profitability and financial stability. Proper assessment and management of underwriting risk are crucial to ensure the insurer remains solvent and can fulfill its obligations to policyholders.