Where's your underwriting? For underwriters, the challenge is finding the right client at the right price and at the right time.

An executive of a large insurance company was showing a "new-to-the-industry" employee around. When they came to the Underwriting Department, the new hire asked, "What do they do?" The executive responded," Nothing, when we're making money; but we blame them when we have a bad claim." Or so the story goes.

According to a free, online encyclopedia, underwriters often refer to themselves as "the police-persons of insurance." They enforce the rules, or underwriting guidelines, established by each carrier. The underwriter is given certain powers, but has discretion on what is seen as bending versus breaking the rules. And just as the police normally receive limited praise when things are going well, underwriters and the police are heavily investigated, scrutinized and vilified when things go wrong.

Underwriting has been around even before the days of Edward Lloyd's Coffee House in London. History tells us that the Babylonians developed one of the earliest recorded examples of underwriting: a method that protected caravan merchants against theft or loss.

The system involved prosperous citizens choosing whether to guarantee payment for loss of any item that might be stolen or damaged, in exchange for receiving an agreed amount of money.

In 1693, the astronomer Edmond Halley created a basis for underwriting life insurance by developing the first mortality table; unfortunately, his table used the same rate for all ages. In 1756, James Dodson of the United Kingdom corrected this error and made it possible to scale the premium rate to age.

Today, underwriting is a combination of art, science and at times, luck. The art of underwriting is knowing when to time the market with the correct pricing; pushing flexibility of the company underwriting rules; how much to lay off on the reinsurer; squeezing capacity; and knowing the personalities of the clients and brokers. The science includes, but is not limited to, the actuaries, risk modeling and benchmarking.

The art and science provide the framework for the underwriter to make decisions and to assure that all possible scenarios are sketched and stretched out before risks are bound or not. But there is also luck and the understated factors that make up the life fabric of the underwriter. It is not always in the control of the underwriter and bad things do happen, as well as good things.

One of the fundamental purposes of underwriting is to reveal the nature of the risk. Several years ago, Martin Handford developed an incredibly simple idea that became a series of popular books entitled, Where's Waldo? On each page of each book is a scene of hundreds of small figures, and among those figures is Waldo. The object is super simple: Find Waldo.

Underwriters are Waldo-finders. But they begin their time and efforts finding the "not right" Waldo. They look for flaws, imperfections, intangibles and patterns--using "gut feelings" honed by experience--and reject those that do not fit. They keep searching until they find the right customer with the right blend of exposure, risk appetite, safety programs and healthy employees; one who doesn't always shop the coverage, and has a willingness to build a long-term relationship.

Only then have they found what they trust is the right client, at the right price, at the right time.

Lance Ewing, a Best's Review columnist, is vice president, Risk Management for Harrah's Entertainment. He can be reached at [e-mail]