Direct written premium (DWP) is the total premium an insurer records on policies it writes directly during a period, before subtracting any premium ceded to reinsurers. It is a volume measure used in insurance financial and statutory reporting.
DWP tells you how much business the insurer wrote directly. It does not, by itself, tell you how profitable that business is.
Written vs earned vs unearned premium
Premium terms are easy to confuse:
- Written premium is recorded when the policy is written or renewed (and can change with endorsements, cancellations, and audits depending on the line).
- Earned premium is the portion of premium that corresponds to coverage provided so far during the policy term.
- Unearned premium is the portion that corresponds to future coverage periods.
An insurer can have high written premium growth while earned premium lags (for example, when writing a lot of new annual policies late in the year).
How reinsurance changes the picture
Reinsurance shifts part of the risk (and associated premium) to another insurer. Two common reporting viewpoints are:
- Direct written premium: what the insurer wrote directly from policyholders.
- Premium after reinsurance effects: premium retained by the insurer after accounting for reinsurance ceded (and sometimes also reinsurance assumed).
This distinction matters because the insurer’s retained risk, capital strain, and profit potential depend on how much is ceded and on the reinsurance terms, not just on direct written volume.
What DWP is used for (and what it is not)
DWP is often used to discuss:
- top-line growth and business volume
- market presence by line of business or geography
- trends in underwriting activity
DWP is not the same as profitability. Loss experience, expenses, reinsurance costs, reserve development, and investment income all affect results.
Example
An insurer writes $120 million of direct premium in a year. It cedes $40 million of premium to reinsurers under its reinsurance program. Its direct written premium is still $120 million, but the premium it ultimately retains is lower because part of the premium (and risk) has been transferred to reinsurers.