What is underwriting profit?
It's the difference between insurance premiums and claims paid out. For example, if an insurer collects £50 million in insurance premiums in a year but spends £30 million in insurance claims and expenses, its underwriting profit is £20 million.
Where have you heard about underwriting profit?
Underwriting profits and losses are regularly reported. The UK property insurance market made an underwriting loss in 2010 due to one of the worst winters on record. In the US, Hurricane Katrina, which devastated New Orleans and the Gulf Coast, caused an underwriting loss of $2.8 billion in the first nine months of 2005.
What you need to know about underwriting profit.
You’d expect most insurers to make an underwriting profit most of the time, but huge claims can result in an underwriting loss. A company’s underwriting income might fluctuate from quarter to quarter if natural disasters like earthquakes, hurricanes and forest fires occur as events such as these can lead to big underwriting losses.
The level of underwriting profit is a way to measure how efficient an insurer’s underwriting activities are.
Find out more about underwriting profit.
Read our definition of underwriting for more information on the risk analysis process.