Question

Why insurance companies are being ranked by their Gross Written Premiums? How it links to their market share?

Answer 1

Insurance companies are important players in the global financial economy and come in many sizes and specialize in different policy lines, from health to life to property & casualty.

There are a number of ways to rank the size of insurance companies. Companies can be measured by their market capitalization (the value of the company on a stock exchange) or by using sales figures, such as net premiums written in a year or how many policies were sold.

Of these, gross premiums written is also an acceptable measure, since they are the total revenue from a contract expected to be received by an insurer before deductions for reinsurance or ceding commissions. 'Written' does not imply collected, but the gross policy premium to be collected as of the issue date of the policy, regardless of the payment plan. Thus, in financial terms, they are the gross margins of the company.

Also, gross premiums written is the sum of both direct premiums written and assumed premiums written, before deducting ceded reinsurance. Direct premiums written represents the premiums on all policies the company's insurance subsidiaries have issued during the year. Assumed premiums are the revenue received for policy coverage that's provided due to a reinsurance agreement.

Thus, together, they reprsent the share of the insurance company under valuation of the total market, on an overall basis. Thus, GWP is also a rough indicator of the company's market share.