|E & EL||Each and Every Loss|
That portion of the premium that has been "used up" during the term of the policy. For example if a one year policy has been in force for 9 months three quarters of the annual premium has been earned.
Because of the difficulties of calculating the exact earned premium for each policy issued by an insurer (who may issue many hundreds of thousands of policies per annum) various methods of calculating an assumed earned premium were developed, the most common being what is termed as the "24ths system" Under this system it is assumed that all policies are issued at the middle of each month. Thus all policies issued in January would have an assumed common inception date of 15th January so, at the 31st December, it would be calculated that 23/24ths of the policies had been "used up" or earned. With the increased utilisation computers it is however now relatively simple to calculate an exact earned premium.
For accounting purposes the earned premium for the current period is calculated as the WRITTEN PREMIUM for the current period plus the UNEARNED PREMIUM of the previous period less the UNEARNED PREMIUM of the current period.