Subject Premium
What Does Subject Premium Mean?
A subject premium is the amount insurance companies charge their customers for coverage. Reinsurance companies use this figure to calculate the premium for their policies by multiplying 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 that an insurance company purchasing reinsurance collects.
It is also known as a base premium or underlying premium.
Insuranceopedia Explains Subject Premium
Insurance companies buy reinsurance to protect themselves against large losses that could potentially bankrupt them. Reinsurance companies are typically larger and have the resources to absorb the losses that regular insurance companies cannot handle. 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.
