Net Written Premium
Financials
Industry:
Fintech
Aliases:
Short Definition
Net Written Premium (NWP) is the total premiums an insurance company retains after deducting the premiums it pays to reinsurers (ceded premiums) from its Gross Written Premium (GWP). It represents the amount of premium risk the insurer carries on its own books during a specific period.
Short Definition
Net Written Premium (NWP) is the total premiums an insurance company retains after deducting the premiums it pays to reinsurers (ceded premiums) from its Gross Written Premium (GWP). It represents the amount of premium risk the insurer carries on its own books during a specific period.
Short Definition
Net Written Premium (NWP) is the total premiums an insurance company retains after deducting the premiums it pays to reinsurers (ceded premiums) from its Gross Written Premium (GWP). It represents the amount of premium risk the insurer carries on its own books during a specific period.
Why it matters for Investors
Retained risk measure: NWP shows how much premium revenue the insurer actually keeps after transferring risk to reinsurers.
Profitability indicator: It reflects the premium volume related to policies the company is financially responsible for.
Underwriting activity: Changes in NWP help evaluate new business growth net of risk sharing.
Why it matters for Investors
Retained risk measure: NWP shows how much premium revenue the insurer actually keeps after transferring risk to reinsurers.
Profitability indicator: It reflects the premium volume related to policies the company is financially responsible for.
Underwriting activity: Changes in NWP help evaluate new business growth net of risk sharing.
Why it matters for Investors
Retained risk measure: NWP shows how much premium revenue the insurer actually keeps after transferring risk to reinsurers.
Profitability indicator: It reflects the premium volume related to policies the company is financially responsible for.
Underwriting activity: Changes in NWP help evaluate new business growth net of risk sharing.
Formula
Practical considerations:
Deduct premiums paid to reinsurers (reinsurance premiums) from the total gross written premiums.
Include both direct and assumed premiums in GWP before subtracting ceded premiums.
Represents the amount of premium an insurer "retains" and is liable for claims against.
Important for solvency and capital adequacy calculations.
Does not include earned premium recognition; it is a measure of written premiums net of reinsurance.
Formula
Practical considerations:
Deduct premiums paid to reinsurers (reinsurance premiums) from the total gross written premiums.
Include both direct and assumed premiums in GWP before subtracting ceded premiums.
Represents the amount of premium an insurer "retains" and is liable for claims against.
Important for solvency and capital adequacy calculations.
Does not include earned premium recognition; it is a measure of written premiums net of reinsurance.
Formula
Practical considerations:
Deduct premiums paid to reinsurers (reinsurance premiums) from the total gross written premiums.
Include both direct and assumed premiums in GWP before subtracting ceded premiums.
Represents the amount of premium an insurer "retains" and is liable for claims against.
Important for solvency and capital adequacy calculations.
Does not include earned premium recognition; it is a measure of written premiums net of reinsurance.
Worked Example
Line Item | Amount ($) | Notes |
|---|---|---|
Gross Written Premium (GWP) | $60,000,000 | Sum of direct and assumed premiums written |
Premiums Ceded to Reinsurers | $15,000,000 | Premiums paid to reinsurers for risk transfer |
Net Written Premium (NWP) | $45,000,000 | Premiums insurer retains, responsible for underwriting |
Notes
The insurer wrote $60 million in total premiums but ceded $15 million to reinsurers for risk sharing.
The net premium of $45 million reflects risk retained and revenue base for underwriting results.
NWP is key to evaluating insurer’s retained risk exposure and financial strength.
Worked Example
Line Item | Amount ($) | Notes |
|---|---|---|
Gross Written Premium (GWP) | $60,000,000 | Sum of direct and assumed premiums written |
Premiums Ceded to Reinsurers | $15,000,000 | Premiums paid to reinsurers for risk transfer |
Net Written Premium (NWP) | $45,000,000 | Premiums insurer retains, responsible for underwriting |
Notes
The insurer wrote $60 million in total premiums but ceded $15 million to reinsurers for risk sharing.
The net premium of $45 million reflects risk retained and revenue base for underwriting results.
NWP is key to evaluating insurer’s retained risk exposure and financial strength.
Worked Example
Line Item | Amount ($) | Notes |
|---|---|---|
Gross Written Premium (GWP) | $60,000,000 | Sum of direct and assumed premiums written |
Premiums Ceded to Reinsurers | $15,000,000 | Premiums paid to reinsurers for risk transfer |
Net Written Premium (NWP) | $45,000,000 | Premiums insurer retains, responsible for underwriting |
Notes
The insurer wrote $60 million in total premiums but ceded $15 million to reinsurers for risk sharing.
The net premium of $45 million reflects risk retained and revenue base for underwriting results.
NWP is key to evaluating insurer’s retained risk exposure and financial strength.
Best Practices
Monitor NWP trends alongside GWP and loss ratios to assess underwriting performance.
Segment by lines of business and regions to identify profitable risk retention areas.
Include clear accounting policies for ceded premiums and reinsurance contracts.
Use NWP in solvency and capital adequacy models to understand retained risk.
Best Practices
Monitor NWP trends alongside GWP and loss ratios to assess underwriting performance.
Segment by lines of business and regions to identify profitable risk retention areas.
Include clear accounting policies for ceded premiums and reinsurance contracts.
Use NWP in solvency and capital adequacy models to understand retained risk.
Best Practices
Monitor NWP trends alongside GWP and loss ratios to assess underwriting performance.
Segment by lines of business and regions to identify profitable risk retention areas.
Include clear accounting policies for ceded premiums and reinsurance contracts.
Use NWP in solvency and capital adequacy models to understand retained risk.
FAQs
Is NWP the same as revenue?
No, it’s premium volume retained after reinsurance deductions, not earned revenue.How is NWP different from GWP?
GWP includes all premiums written; NWP subtracts ceded premiums to reinsurers.Why subtract ceded premiums?
To reflect the premium risk and income the insurer actually retains.Can NWP be negative?
Rare but possible, usually temporary due to settlement timing or reinsurance transactions.
FAQs
Is NWP the same as revenue?
No, it’s premium volume retained after reinsurance deductions, not earned revenue.How is NWP different from GWP?
GWP includes all premiums written; NWP subtracts ceded premiums to reinsurers.Why subtract ceded premiums?
To reflect the premium risk and income the insurer actually retains.Can NWP be negative?
Rare but possible, usually temporary due to settlement timing or reinsurance transactions.
FAQs
Is NWP the same as revenue?
No, it’s premium volume retained after reinsurance deductions, not earned revenue.How is NWP different from GWP?
GWP includes all premiums written; NWP subtracts ceded premiums to reinsurers.Why subtract ceded premiums?
To reflect the premium risk and income the insurer actually retains.Can NWP be negative?
Rare but possible, usually temporary due to settlement timing or reinsurance transactions.
Related Metrics
Commonly mistaken for:
Direct Written Premium (DWP) (It is premiums written directly on policies sold by the insurer)
Gross Written Premium (GWP) (It is DWP plus premiums assumed via reinsurance)
Earned Premium (It is portion of premiums recognized as revenue over time)
Related Metrics
Commonly mistaken for:
Direct Written Premium (DWP) (It is premiums written directly on policies sold by the insurer)
Gross Written Premium (GWP) (It is DWP plus premiums assumed via reinsurance)
Earned Premium (It is portion of premiums recognized as revenue over time)
Related Metrics
Commonly mistaken for:
Direct Written Premium (DWP) (It is premiums written directly on policies sold by the insurer)
Gross Written Premium (GWP) (It is DWP plus premiums assumed via reinsurance)
Earned Premium (It is portion of premiums recognized as revenue over time)
Components:
Index