What is a Written Premium
A written premium is an accounting term in the insurance business used to describe the total premiums on policies issued by an insurance company during a specific period of time regardless of what portions have been earned. Written premiums are the amount of premium charged for a policy that has already become effective.
BREAKING DOWN Written Premium
Written premiums refer to the amount of premiums customers are required to pay for insurance policies written during the accounting period. This is different from premium earned, which is the amount of premiums that a company has earned by providing insurance against various risks during the year. Written premiums may be measured as a gross (before deduction of reinsurance costs) or net (after reinsurance costs) number.
Written premiums are the principal source of an insurance company's revenues and thus will appear on the top line of the income statement. The insurance industry is cyclical (along with the business cycle) and competitive, with numerous participants fighting for market share primarily on the basis of price. When there is excess underwriting capacity in the industry, prices are pressured downwards; when there is a shortage of capacity, insurers can exercise a measure of pricing power in premiums.