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What's right: JNP or GWP?

Updated: Mar 24, 2023

Using the wrong terms for expressing the size of broker businesses could mislead investor's decision making processes.


The buttom line effect of such descisions based on missleading terms for these metrics can be significant. Let's have a closer look to the different point of views.


Broker business size

The "size" of an insurance broker business often is measured by the recurring revenue made through commissions being payed by the insurer. This inlcudes both first time commissions and recurring commissions.


Another metric is the volume of contracts, measured in different ways depending on the line of business (see post "broker's revenues" - coming soon). For example, P&C volume is measured by the premiums to be paid by the policy holder.


In Germany, the term "Jahresnettoprämie" (JNP) is being used to express the premium payed deducted by the insurance tax amount, that currently is 19% of the JNP.

Jahresnettoprämie may be translated best into net (yearly) policyholder premium (NYP).

When a policyholder has to pay an anual amount of 119 Euros to the insurer, this amount includes 19 Euros insurance tax, so 100 Euros Jahresnettoprämie (JNP) is the metric being used. Full example see at the end of this post.

Insurer business size

From an insurers point of view this "Jahresnettoprämie" (JNP or NYP) equals the gross written premium (GWP). This is the sum of premiums written witout insurance tax before deducted by ceded reinsurance premiums. This is a metric for determining the size of business of an insurer.

In the insurer's profit and loss statement it all starts with the gross written premium amount. The 100 Euro NYP, which may be wrongely translated to yearly net written premium! In the example above, the 100 Euro become gross written premium (GWP) and not net written premium! Full example see at the end of this post.

Conclusion

Don't mix these terms up! Make sure you are talking about the same thing. This could be easily done by referring the the respective point of view when talking about these metrics: Broker or insurer. Otherwise the terms can be misleading or confusing. Decisions based on wrong metrics can lead to bad investments. As the example below illustrates, there can be 23% points difference between NYP/GWP and NWP!


For example, a public listed FinTech in Germany has published the amount of written premiums of their broker clients (Jahresnettoprämie (JNP)) using the term net written premiums (NWP). Instead, they rather had to apply the term gross written premiums (GWP) to express their metric correctly.


Example

Net yearly premium (NYP) equals gross written premium (GWP).




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