Net Premiums Written

What it is

Net premiums written (NPW) is the total amount of premiums an insurance company writes during a period, after accounting for reinsurance. In formula form:

Net Premiums Written = Gross Premiums Written − Premiums Ceded to Reinsurers + Reinsurance Assumed

NPW represents the portion of written premiums the insurer retains for bearing risk.

Why it matters

• NPW indicates how much new business an insurer is generating in a given period and helps gauge growth or contraction.
• Changes in NPW can reflect market share shifts, pricing competitiveness, product mix, or strategic changes in underwriting and reinsurance.
• Analysts use NPW alongside earned premiums, loss ratios, and expense measures to assess profitability and capital needs.

Earned vs. unearned premiums

• Written premiums are recognized when policies are issued; earned premiums are the portion of written premiums that apply to the expired portion of coverage.
• Unearned premiums are a liability: if a policy is canceled early, the insurer must return the unearned portion.
• When an insurer writes more business during a period, written premiums may exceed earned premiums until coverage is earned over time.

Reinsurance effects

• Premiums ceded to reinsurers reduce NPW because the insurer transfers part of the risk.
• Reinsurance assumed adds to NPW when an insurer takes on risk from other carriers.
• For tax and financial reporting, reinsurance transactions affect both top-line premium figures and net retained risk.

Expenses and the NPW calculation

• NPW itself excludes operating expenses, but insurers set premiums to cover expected future expenses (commissions, claims-handling, legal costs, salaries, taxes, administrative costs).
• The relationship between gross and net premium values reflects the present value of expense loadings versus the present value of anticipated future expenses. If expected future expenses are lower than the expense loadings included in premiums, gross value will exceed net value after adjustment.

Interpreting NPW trends

• Increasing NPW: typically signals growth in new policies or expansion into new markets; sustainable growth should be evaluated alongside underwriting quality and claims performance.
• Decreasing NPW: may indicate reduced sales, loss of market share, competitive pricing pressure, or deliberate premium contraction to improve underwriting profitability.
• Compare NPW with earned premiums, loss ratios, combined ratios, and reinsurance activity to get a full picture of an insurer’s performance.

Measurement variations

• Some markets use alternative metrics for new business. For example, in the U.K., insurers commonly use the annual premium equivalent (APE) to measure new policy premiums from ongoing and single-premium business.

Simple example

If an insurer writes $120 million in gross premiums, cedes $30 million to reinsurers, and assumes $5 million of reinsurance:
Net Premiums Written = $120M − $30M + $5M = $95M

This $95 million is the net amount of written premiums the insurer retains for the period.

Bottom line

Net premiums written is a core top-line metric for insurers that reflects the volume of risk retained after reinsurance. Evaluating NPW trends together with earned premiums, expense expectations, and reinsurance strategy provides insight into an insurer’s growth, risk exposure, and underwriting health.