1. The act of assuming a risk by insuring it; the insurance of life or property. See INSURANCE. [Cases: Insurance 1515.]
2. The act of agreeing to buy all or part of a new issue of securities to be offered for public sale. [Cases: Securities Regulation 11.18, 60.31. C.J.S. Securities Regulation §§ 69, 71, 199.] — underwrite, vb.
best-efforts underwriting. Underwriting in which an investment banker agrees to direct, but not guarantee, the public sale of the issuer’s securities. • The underwriter, or selling group, sells the securities as agent for the issuer, and any unsold securities are never issued.
firm-commitment underwriting. Underwriting in which the underwriter agrees to buy all the shares to be issued and remain financially responsible for any securities not purchased. • The underwriter, or underwriting group, buys the securities from the issuer and resells them as principal. In this type of underwriting, securities that cannot be sold to the public are owned by the underwriter, and the issuer is paid for those securities as well as the others.
standby underwriting. Underwriting in which the underwriter agrees, for a fee, to buy from the issuer any unsold shares remaining after the public offering.
— Also termed strict underwriting.
