Underwriting Gain
What Does Underwriting Gain Mean?
Underwriting gain is the difference between net premiums and any claims and other insurance-related expenses, excluding other income such as investment gains. It indicates how effectively an insurance company manages its underwriting policies and reflects the overall viability of the insurance business.
Insuranceopedia Explains Underwriting Gain
In general, underwriting gain is the excess of premiums over claims. A more detailed breakdown includes premiums minus reinsurance premiums, company operating expenses, loss adjustment expenses, marketing and commission expenses, and claims. Therefore, underwriting income refers to income generated solely from insurance activities.
An underwriting loss occurs when expenses exceed premiums, which can result from poor underwriting practices that lead to higher-than-expected losses. Setting appropriate premium rates is crucial to an insurer’s financial solvency. However, unforeseen events, such as natural disasters or terrorist acts, can significantly impact underwriting gain and lead to unexpected losses.
