Underwriting Income

DEFINITION of 'Underwriting Income '

Profit generated by an insurer's underwriting activity over a period of time. Underwriting income is the difference between premiums collected on insurance policies by the insurer, and expenses incurred and claims paid out. Huge claims and disproportionate expenses may result in an underwriting loss, rather than income, for the insurer. The level of underwriting income is an accurate measure of the efficiency of an insurer's underwriting activities.

BREAKING DOWN 'Underwriting Income '

For example, if an insurer collects $50 million in insurance premiums over a year, and spends $40 million in insurance claims and associated expenses, its underwriting income is $10 million.


An insurer's underwriting income may fluctuate from quarter to quarter, with natural and other disasters such as earthquakes, hurricanes and fires leading to huge underwriting losses. Hurricane Katrina, the largest natural catastrophe in US history, caused an underwriting loss of $2.8 billion for the US property/casualty insurance industry in the first nine months of 2005, compared with underwriting income of $3.4 billion in the corresponding period of 2004.

RELATED TERMS
  1. Underwriting Risk

    The risk of loss borne by an underwriter. Underwriting risk generally ...
  2. Underwriting Fees

    Underwriting fees are monies collected by underwriters for performing ...
  3. Insurance Underwriter

    A financial professional that evaluates the risks of insuring ...
  4. Underwriting Spread

    The spread between the amount underwriters pay an issuing company ...
  5. Transferable Underwriting Facility ...

    A type of underwriting facility that deals in Euro notes. Transferable ...
  6. Underwriting Agreement

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

    Is Insurance Underwriting Right For You?

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

    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. Investing

    IPO Basics: Getting In On An IPO

    The Underwriting Process Getting a piece of a hot IPO is very difficult, if not impossible. To understand why, we need to know how an IPO is done, a process known as underwriting. When a company ...
  4. Personal Finance

    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.
  5. Investing

    The Industry Handbook: The Insurance Industry

    As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the simplest terms, insurance of ...
  6. Personal Finance

    How Big Data Has Changed Insurance

    No longer confined to technology, big data has become integral to providing solutions to the insurance industry's long standing challenges.
  7. Investing

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  8. Personal Finance

    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.
  9. Personal Finance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  10. Personal Finance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. When is an underwriting fee too high on a commercial loan?

    Learn about underwriting fees and when they're too high. If the underwriting fee exceeds 2% of the total loan size, the fee ... Read Answer >>
  4. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  5. How do I calculate the combined ratio?

    Learn about the combined ratio and how it is calculated under a financial basis and a trade basis using the loss ratio and ... Read Answer >>
  6. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center