Net premiums
Gross premiums less ceded premiums, representing the premium income actually retained by the cedant.
Net premiums (NWP) are obtained by deducting ceded premiums from GWP. They constitute the cedant's actual revenue base to cover net losses and expenses. Combined with net losses they form the net loss ratio. A high cession rate sharply reduces net premiums, increasing net loss ratio sensitivity to residual fluctuations. Net premiums are the most relevant indicator of the cedant's standalone earnings capacity.
Textbook case: GWP 20 M EUR − ceded premiums 6 M EUR = net premiums 14 M EUR. Net losses 9.8 M EUR / 14 M EUR = 70% net loss ratio.
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