Portion of written premiums corresponding to the coverage period already elapsed, the reference denominator for technical ratios.
Earned premiums represent the portion of collected premiums definitively earned within the accounting period, i.e. the fraction corresponding to coverage already provided. For an annual policy incepting 1 July, only half the premium is earned by 31 December; the rest forms the unearned premium reserve (UPR). Earned premiums are the natural denominator for the loss ratio, expense ratio and combined ratio as they reflect risk actually run. In a fast-growing portfolio they are below written premiums; the reverse holds in contraction. Always verify that competitors' published ratios use the same basis before comparing.
An insurer collects 1,000,000 EUR of written premiums of which 80,000 EUR relates to near-future coverage. Earned premiums amount to 920,000 EUR, the base for the year's loss ratio.
earned premiums, prime acquise, primes gagnées, earned premium