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~NA.°.. -19' U11~10iV) Id ?d L~1'NOFFIC6S p_ ilpl <br />In forming my opinion on the loss and loss adjustment expense reserves, I relied upon <br />data prepared by the responsible officers and employees of the company or group to <br />which it belongs. I evaluated the data for reasonableness and consistency. I reviewed the <br />reconciliation of the data to Schedule P Part 1 of the Company's current annual <br />statement. In other respects, my examination included such review of the actuarial <br />assumptions and methods used and such tests of the calculations, as I considered <br />necessary. <br />Data tmderl;ring my actuarial review was compiled on a basis net of salvage and <br />subrogation. Reserves computed using this data implicitly anticipate future salvage and <br />subrogation recoveries. The 5818,000 in Schedule P -Part 1 column 23 is for anticipated <br />recoveries from medical malpractice claims for physicians who worked for the State <br />University ofNew York (SUN7~. <br />The discount included as a reduction to loss reserves and loss adjustment expense <br />reserves as reported in Schedule P-Analysis of Losses and Loss Expense, Underwriting <br />and Investment Exhibit-Part 3A and on Page 3-Liabilities, Surplus and Other Funds, <br />Lines 1 and 2, includes the nontabulaz discount of $8,479,000 and tabular discount of $0. <br />The Company only discounts its 2000 accident/ report year medical malpractice liability <br />loss and loss adjustment expense reserves for the time value ofmoney at an interest rate <br />of 5.0%. The discount amount is material to the Company's statutory surplus. This is a <br />change from December 31, 1999 where the Company discounted all accident/ report <br />years for medical malpractice liability loss and loss adjustment expenses reserves. The <br />discount at December 31, 1999 was $53,617,000_ <br />The Company participates in certain voluntary and involuntary pooling arrangements. <br />The principle pool for which the majority of liability exists is the National Workers' <br />Compensation Reinsurance Pool. The Company has relied on the National Workers' <br />Compensation Pool for the accuracy, completeness, and timelines of the loss and loss <br />adjustment expense reserve information, The reported loss and loss adjustment expense <br />reserves for pools and associations aze included on page 3, lints 1 and 2, of the <br />Company's 2,000 Annual Statement in the amount of 53,015,000. The Company's <br />exposure to loss under these pools is small relative to the aggregate of reserves for losses <br />and loss adjustment on page 3, lines 1 and 2, of the Company's 2000 Annual Statement, <br />The net reserves for losses and loss adjustment expenses that the Company carries for <br />asbestos liabilities are $0, and for envirotunental liabilities are $0. These amounts ate <br />included in the reserves on Page 3-Liabilities, Surplus and Other Funds, Lines 1 and 2, <br />and disclosed in the notes to Financial Statements. The Company has not provided <br />coverage that could reasonably be expected to produce material levels of asbestos claim <br />liability or environmental claim liability. <br />Based on discussions with Company management and its description of the Company's <br />ceded reinsurance, I am aware of one reinsurance contract (having a material effect on <br />the loss or loss expense reserves) that has been or should be accounted for as retroactive <br />