Gross Net Written Premium Income
What Is Gross Net Written Premium Income (GNWPI)?
Gross net written premium income (GNWPI) is the dollar amount of an insurance company's premiums that are utilized to figure out which portion of premiums is owed to a reinsurer. Gross net written premium income is the base to which the reinsurance premium rate is applied, considering scratch-offs, refunds, and premiums paid for reinsurance coverage.
Grasping Gross Net Written Premium Income (GNWPI)
At the point when an insurance company goes into a reinsurance agreement, it decreases its overall risk exposure by ceding a few risks to a reinsurer. In exchange for facing these risks, challenges reinsurer is qualified for a portion of the insurer's premiums.
In a non-proportional reinsurance agreement, the amount of premiums that the reinsurer is qualified not entirely set in stone by a fixed rate. This rate is increased by a base premium, which addresses the dollar amount of an insurer's premiums to which the reinsurer is entitled.
Special Considerations
How the subject premium is calculated is defined in the reinsurance contract. The gatherings consent to the reinsurance rate premium percentage that will be applied to the base premium, and whether the base premium — likewise called the subject premium or underlying premium — will be calculated utilizing earned or written premiums.
Whenever earned premiums are picked, the calculation utilizes gross net earned premium income (GNEPI) as the base. This is the most common rating base for an excess of loss reinsurance. In the event that the agreement utilizes written premiums, GNWPI is utilized.
Gross net written premium income is calculated by taking the ceding insurer's premium income, instead of premium receipts. The premiums are "net," implying that any cancelations, refunds, and premiums paid for reinsurance are deducted, and "gross" since expenses are not deducted. In the event that the amount of risk taken on by the reinsurer increments over the long run, the written premium income will be higher than earned premium income.
GNWPI versus Gross Broking Income
Gross net written premium income is a decent measure of how well an insurer is doing, yet it doesn't consider earnings on investments, for example, equities or bonds. It additionally doesn't consider any assets that the insurer has. That is the reason many firms are more keen on broking gross income, which incorporates those figures. Thus, while GNWPI is a decent indicator, you can't depend on it exclusively to determine an insurer's financial wellbeing.
Features
- Gross net written premium income (GNWPI) is the dollar amount of an insurer's premiums that are utilized to decide the amount owed to a reinsurer.
- On the off chance that the amount of risk taken on by the reinsurer increments over the long haul, the written premium income will be higher than earned premium income.
- Reinsures are generally qualified for a portion of an insurer's premiums for taking on a portion of the insurer's risks.
- GNWPI is the base to which the reinsurance premium rate is applied, considering scratch-offs, refunds, and premiums paid for reinsurance coverage.
- The rate used to decide the amount due to a reinsurer can be based on written premiums — where GNWPI is utilized — or earned premiums — where gross net earned premium income (GNEPI).
