The concept of net premium written can be defined as the total sum of all the premiums written by the insurance company over a particular time period. The premium relinquished to the other insurance companies is subtracted while calculating the net premium written where as the reinsurance is added to the net premium if it is being assumed by the insurance company. The net premium written can be described as the total sum of the premiums that an insurance company gets to keep for assuming risk.
It is difficult to determine whether an insurance company is a strong company or it is a weak company. The strength and the weakness of an insurance company can be determined by the policies of the insurance company and the risk associated with those policies. One way of detecting the financial health and the worth of an insurance company is to have a look on the net premium written of the insurance company from year to year. If there is an increase in the net premium written it will show that there is an increase in the new policies being written by the insurance company. On the other hand the decrease in the net premium written of the insurance company indicates that a fewer new policies are being written by the insurance company. One reason of decrease in the net premium written is due to the fact that new competitors are entering in the market and are eating the market share of the company.
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