Net Premiums Written

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Definition of 'Net Premiums Written'

Net premiums written (NPW) is the total amount of premiums collected by an insurance company before any deductions for expenses or commissions. It is a key metric used to measure the profitability of an insurance company.

NPW is calculated by adding up all of the premiums collected by an insurance company during a given period of time. This includes premiums from both new and renewal policies. NPW is then adjusted for any changes in the value of money, such as inflation or deflation.

NPW is an important metric because it provides a measure of the financial health of an insurance company. A high NPW indicates that the company is generating a lot of revenue, which can be used to pay for expenses and make a profit. A low NPW indicates that the company is struggling to generate revenue, which can lead to financial problems.

NPW is also used to calculate other key metrics, such as the combined ratio and the loss ratio. The combined ratio is a measure of the profitability of an insurance company, and it is calculated by dividing the total amount of losses and expenses by the total amount of premiums written. The loss ratio is a measure of the amount of money that an insurance company pays out in claims, and it is calculated by dividing the total amount of claims paid by the total amount of premiums written.

NPW is a valuable metric for investors and analysts to use when evaluating an insurance company. It provides a measure of the company's financial health and can help to identify companies that are likely to be profitable in the future.

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