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III IIIIIIIIIIIIIIII <br />999 <br />March 27, 2001 <br />INTEROFFICE MEMORANDUM <br />TO: Bob Howard, AGO <br />Debbie Hulstrom, Division of Insurance <br />FROM: Cheryl A. Linden ~- <br />First Assistant Attorney General <br />Natural Resources and Environment Section <br />RE: Frontier Insurance Company <br />You may recall that in November, 2000, we met with you concerning Frontier Insurance <br />Company. To bring you up to date, the Division of Minerals and Geology (DMG), holds <br />several bonds issued by Frontier for coal mining sites here in Colorado. One coal operator, <br />Powderhorn Coal Company, filed a petition in bankruptcy in June 2000. Frontier issued a <br />$2.6 million bond on Powderhom's site. <br />In December 2000, DMG issued a notice of violation requiring Powderhom to replace its <br />Frontier bond. The time in whi~h to replace the bond has now been extended by the DMG to <br />May 31, 2001. Frontier has submitted to us its reinsurance agreement with National <br />Indemnity Co. and an addendum which, according to Frontier, allows the reinsurance <br />agreement to apply to all surety bonds. In addition, Frontier has committed to submit to us <br />actuarial reports on its financial condition. <br />Please find enclosed the reinsurance agreement between Frontier and National Indemnity, the <br />addendum to that agreement, and the initial actuarial report from Frontier. Frontier will be <br />sending supporting documents to its actuarial report in the near future. <br />Bob Clazk and I aze requesting your assistance in this matter. Specifically, we would like to heaz <br />your interpretation of the reinsurance agreement and the addendum thereto, and how they apply <br />to the bonds DMG holds on the Powderhorn and other sites. We would also like to heaz your <br />reading of the actuarial reports. One of our goals is to determine the financial condition and <br />viability of Frontier. Please let me know if you need further information. My direct phone <br />number is 866-5032. Bob's direct line is 866-5153. <br />Bob is out of the office for the remainder of this week; I will be out of the office next week <br />(Apri12-6). We would like to set a meeting with you once Bob and I aze both back in the office. <br />I thank you in advance for your assistance. <br />