Which of the following is listed as a reason for a large decrease in premium (Ratio 3)?

• A. Higher costs of capital.
• B. Abrupt entry into new markets.
• C. Loss of market share.
• D. Increased investment income.

Answer: (C)

Losing market share best explains a large drop in written premium because premium volume depends on how much business you actually write. If you lose customers to competitors, the total premium you write declines even if your prices are the same or higher. In other words, the scale of written premium moves with market share—the portion of the market you capture. The other factors affect profitability or earnings (like investment income or costs of capital) but don’t directly reduce the amount of business you write. Abruptly entering new markets might change volumes, but a large decrease in premium is most directly tied to shrinking share of the market.