DEFINITION of 'Underwriting Expenses'

Costs and expenditures associated with underwriting activity. Underwriting expenses include a wide range of expenditures, and the exact definition differs for insurers and investment banks. As a major expense category, the lower these expenditures are as a proportion of underwriting activity, the higher the profitability of the insurer or investment bank.

BREAKING DOWN 'Underwriting Expenses'

For an insurer, underwriting expenses may include direct costs such as business acquisition, actuarial reviews and inspections, as well as indirect costs such as commissions paid and accounting, legal and customer service expenses. For an investment bank, underwriting expenses would include such costs as due diligence activities and research, legal and accounting fees.


The expense ratio for an insurer is obtained by computing underwriting expenses as a percentage of premiums earned for a given period. Since the profitability of an insurer has an inverse correlation with the expense ratio, insurers strive to keep this ratio in check in order to remain profitable.

RELATED TERMS
  1. Underwriting Income

    Profit generated by an insurer's underwriting activity over a ...
  2. Adjusted Underwriting Profit

    The profit that an insurance company generates after paying out ...
  3. Underwriting Cycle

    Fluctuations in the underwriting business over a period of time. ...
  4. Insurance Underwriter

    A financial professional that evaluates the risks of insuring ...
  5. Underwriting Capacity

    Underwriting capacity is the maximum liability that an insurance ...
  6. Underwriting Agreement

    A contract between a group of investment bankers who form an ...
Related Articles
  1. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
  2. Insurance

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  3. Financial Advisor

    All About Impaired Risk Annuites and Insurance

    What are impaired risk insurance products and understanding life insurance rate classes, table ratings and flat extra premiums.
  4. Insurance

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  5. Insurance

    For Life Insurers, Making Money Is A Numbers Game

    Life insurance is a data-driven industry that relies on complex financial models to predict future expenses and income from premiums and investments.
  6. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  7. Insurance

    Can I Get Life Insurance?

    Find out what you can do to get the coverage you need for the right price.
  8. Investing

    Has The Combined Ratio For P/C Peaked?

    The property and casualty industry combined ratio hit 104.7 in 2008, but recent industry survey and management commentary indicate that things might be getting better.
  9. Insurance

    IPO Flippers And The Companies Who Hate Them (TWTR, ETSY)

    Learn how flipping activity affects an initial public offering.
RELATED FAQS
  1. How does insurance underwriting differ from investment underwriting?

    Understand the difference between insurance underwriting and investment underwriting, including what types of risks an underwriter ... Read Answer >>
  2. What is the difference between underwriting and investment income for an insurance ...

    Learn more about insurance companies' investment and underwriting incomes. Read about how investment incomes and underwriting ... Read Answer >>
  3. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ... Read Answer >>
  4. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter as well as the important ... Read Answer >>
  5. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Answer >>
  6. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
Hot Definitions
  1. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  2. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  3. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  4. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  5. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  6. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
Trading Center