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01;14. -19' U! IMON) 14 ?8 L.aWOFFICES P. UIU STATEMENT OF ACTUARIAL OPINION Annual Statement of the Frontier Insurance Company For the Year Ended December 31.2000 Page 3 of 5 One ceded reinsurance contract was accounted for by the Company as retroactive reinsurance. This contract has a material impact on surplus. The reserves shown in the Company's Annual Statement and my opinion regarding those reserves do not reflect cessions related to this contract. Based solely on discussions with FIC's management and their descriptions of FIC's ceded and assumed reinsurance, I am not aware of any other reinsurance transaction that either has been or should have been accounted for as retroactive reinsurance or as financial reinsurance (defined as contractual arrangements that do not include a transfer of both timing and underwriting risk), The Company has represented to me that it has no unearned premium for long duration contracts as defined in Section 12 of the Annual Statement Instructions. My opinion on the loss and loss adjustment expense reserves net of ceded reinsurance assumes that all ceded reinsurance is valid and collectible. The majority of FIC's ceded loss and loss adjustment expense reserves are with residual market pools, or with companies rated A- or better by a reputable insurance rating agency, or whose obligations are fully collateralized. In addition, FIC has represented to me that it knows of no uncollectible reinsurance cessions. I have not anticipated any contingent liabilities that could arise if the reinsurers do not meet their obligations to FIC as reflected in the data and other information provided to me. Uncollectible reinsurance could be material relative to surplus because of the low level of surplus. I have reviewed FIC's exposure to asbestos and environmental claims. In my opinion, there is a remote chance of material liability, since reported claim activity levels are minimal, and FIC did not write lines of business which are typically exposed to such losses. FIC participates in a small number of voluntary and involuntary pools. Company practice is to record the loss and loss adjustment reserves reported to it by the pools without accrual for any reporting lag. Reserve exposure with respect to pools is considered to be immaterial. FIC writes a variety of coverages whose risk factors expose FIC's loss and loss adjustment expense reserves to significant variability. I have identified the major risk factors as future favorable or unfavorable legislative or judicial actions. The potential effect of these factors is unknown at this time. The absence of other risk factors from this listing does not imply that additional factors will not be identified in the future as having been a significant influence on FIC's reserves. Tillinghasr- Towers I~rrirz