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{LaR. -19' UI IhION) Id ?8 L~IWOFFICES <br />STATEMENT OF ACTUARIAL OPINION <br />Annual Statement of the Frontier Insurance Company <br />For the Year Ended December 31.2000 <br />Page 4 of 5 <br />P.UII <br />There is a risk of material adverse deviation because reasonably expected <br />fluctuations of actual versus expected results could be material relative to surplus. <br />This risk is mitigated by a retroactive reinsurance agreement applicable to all lines of <br />business for occurrence/report years 1999 and prior and also to surety for <br />occurrence/report year 2000. However, the retroactive reinsurance does not provide <br />protection against uncollectible reinsurance. Thus, uncollectible reinsurance could <br />be material relative to surplus. <br />As of December 31, 2000, FIC included a provision for discount of 58,478,383 related <br />to its medical malpractice loss and loss adjustment expense reserves for <br />occurrence/report year 2000. This is a change from December 31, 1999 when <br />medical malpractice loss and loss adjustment expense reserves for all years were <br />discounted. The prior discount amount was $53,616,738. <br />Reserves are established gross of anticipated salvage and subrogation, except for <br />one medical malpractice account where recoverable of 5818,000 is recorded. <br />An exceptional value was produced for IRIS tests 9, 10 and 11 due to significant <br />reserve strengthening in 1999 and 2000. <br />OPINION <br />In my opinion, the amounts recorded in the Annual Statement for the surn of items A, <br />Band E, as well as the sum of items C and D above: <br />a) meet the requirements of the insurance laws of the State of New York; <br />b) are consistent with amounts computed in accordance with the Casualty Actuarial <br />Society Statement of Principles Regarding Property and Casualty Loss and Loss <br />Adjustment Expense Reserves and relevant standards of practice as promulgated <br />by the Actuarial Standards Board; and <br />c) make a reasonable provision for all unpaid loss and loss adjustment expense <br />obligations of FIC under the terms of its policies and agreements. <br />Tillinghast- <br />TmaersPerritt <br />