Subject Premium

Published: | Updated: January 9, 2018

Definition - What does Subject Premium mean?

A subject premium is the amount insurance companies charge their customers for coverage. Reinsurance companies use it to calculate the premium for their policies. They multiply it by their reinsurance rate. For example, if a reinsurance company has a reinsurance rate of 30%, they would receive $30 of every $100 of subject premium an insurance company buying reinsurance receives.

It is also known as a base or underlying premium.

Insuranceopedia explains Subject Premium

Insurance companies buy reinsurance to protect themselves against large losses that would bankrupt them. Reinsurance companies are generally larger and have the resources to handle the losses that regular insurance companies cannot. In exchange for this protection, insurance companies give a percentage of their premium income to the reinsurance company. In other words, the reinsurance company takes a share of the subject premium.

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