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!taR. -I9' UI Ij10~) ld:?~ L~IWOFFICES Opinion: In my opinion, the amounts carried in the scope pazagraph on the account of the item identified: A. Meet the requirements of the insurance laws of the state of New York. B. Are computed in accordance with accepted loss reserving standards and principles. C. Make a reasonable provision, in the aggegate, for all unpaid lass and loss expense obligations and all unearned premium obligations of the Company related to claims made medical malpractice DDR benefits under the terms of its policies and ageements. In evaluating whether the reserves make a reasonable provision for unpaid losses and loss adjustment expenses, it is necessary to project future loss and loss adjustment exTense emergence and payments. It is certain that the actual future losses and loss adjustment expenses will not develop exactly as projected and may, in fact, vary significantly from the projections. My projections make no provision for extraordinary future emergence of new classes of losses or types of losses not sufficiently represented in the Company's historical database or which are not yet quantifiable. There is a risk of an adverse material deviation to surplus to the extent that the actual loss and loss adjustment payments approach the high end of the reasonable range of reserves for unpaid loss and loss adjustment expense. This risk is mitigated by the retrospective reinsurance, which protects the Company's surplus against adverse loss and LAE development for accideaU report yeazs 1999 and prior for all lines excluding surety and for all accident years 2000 and prior for surety. For example, if the loss and LAE expense increases by $10 million (approximately 1.4%), then surplus decreases by approximately 63%. However, if the adverse reserve development increase is all in the accident/ report years 1999 and prior, there is no impact to surplus due to the retroactive reinsurance. Relevant Comments: The Company's state of domicile is New York. The Risk Based Capital (RBC) regulations and guidelines have not yet been adopted by New York as of December 31, 2000. The Company's RBC ratio is at the mandatory control level based on the information contained in the December 31, 2000 Statutory Annual Statement. One change in actuarial method was made in 2000. The change was to only discount the accident/ report yeaz 2000 medical malpractice reserves rather than to discount all the accidrnt year/ report years for medical malpractice. This change was made since the retroactive reinsurance (adverse toss development cover) replaces the Company with National Indemnity Company (a Berkshire Ilatbaway subsidiary) as the party responsible P OOJ