What is the definition of Net Premiums Written?

Net Premiums Written are the total amount of premiums that the insurance company receives minus any related expenses such as agent's commissions and reinsurance premiums.

When an insurance company receives the premiums from the policyowner, this premium is called gross premiums written. These premiums are what the insurance company stands to get over the life of the contract.

When an insurance company writes an insurance policy to cover a risk and receives premiums from the policy, it oftentimes would want to spread the risk and thus ensure that it is protected from losses that exceed a specified threshold. What it does is to pass on a portion of the insurance to a reinsurer. The premiums for that portion of insurance are then paid to the reinsurer.

So, the insurance company does not get all the premiums it receives. That is why Net Premiums Written is an important performance measure for insurance companies, as it gives an indication of the level of sales for risks that they themselves cover.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage