Earned Premiums or Premiums Earned Definition & Meaning | Insurance Term | CSIMarket
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Glossary

Earned Premiums or Premiums Earned

Insurance Term

Earned Premiums or Premiums Earned is a term used in the insurance industry to refer to the portion of an insurance premium that has been earned by the insurer during a specific period. It is the amount of money that the insurer has earned from policyholders for providing insurance coverage and services. Earned premiums are a key financial metric used by insurers to measure their financial performance and profitability over time.

Earned premiums are calculated by subtracting the unearned portion of premiums (which represents the portion of the premium that covers the remaining term of the policy) from the total premiums received. This calculation results in the amount earned by the insurer for the specific period.

Earned premiums are used by insurers to determine their gross written premium (GWP), which is the total amount of premiums that the insurer has written or issued during a specific period. The earned premiums are also used to calculate the insurer’s loss ratio, which represents the ratio of claims incurred to the earned premiums during the same period. This ratio is an important measure of an insurer’s underwriting profitability.

Earned premiums are also used by insurers to determine their statutory financial statements and their financial solvency. They are reported on an insurer’s income statement or profit and loss statement and are used by investors, regulators, and other stakeholders to evaluate the insurer’s financial performance and stability.


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