Net Premium Written
Net premiums written is the sum of all types of insurance premiums which a company may collect throughout the whole duration of existing insurance policies minus the costs like agent`s commissions or payments made for reinsurance. It gives an indication of the level of sales for risks that they themselves cover. Although there is a presumption that an insurance company is financially sound when it possesses a positive net premiums written, it is also important to remember that having a negative net premiums doesn’t mean that the company is insolvent and is not capable of providing the benefits promised. The nature and timing of reinsurance transactions or other factors which are present in the process of transactions can affect the net premium written negative, but negative net written premiums can be temporary.
Under accrual-basis accounting, only premiums pertaining to the relevant accounting period are recognized as revenues. These premiums are called net premiums earned.
Read more about this topic: Gross Premiums Written
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