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unrelated insurance companies that had written direct insurance
covering petitioners--for example, Arkwright-Boston, which wrote
direct property coverage for petitioners. The amounts involved
are less than 1 percent of total reserves at December 31, 1986,
and Parthenon is not claiming a deduction for an addition to its
reserves for those liabilities.
During policy years 1981 through 1986, Parthenon negotiated
reinsurance agreements with a number of professional reinsurance
companies in the United States and England covering portions of
the risks of petitioners and of the managed hospitals that
Parthenon had insured. During policy year 1981, Parthenon ceded
all potential liabilities in excess of $350,000 per occurrence to
reinsurers. Liabilities in the layer $650,000 excess of $350,000
were ceded to General Reinsurance Corp. (General Re), the largest
reinsurance company in the United States. Liabilities in the
layer $4 million excess of $1 million were ceded 80 percent to
General Re and 20 percent to various syndicates at Lloyds of
London. The remaining liabilities were ceded 20 percent to
General Re, 40 percent to INA Reinsurance Co., and 40 percent to
a consortium of Lloyds syndicates and British reinsurance
companies. General Re, Parthenon's principal reinsurer, reviewed
Parthenon's claims and other operations on an ongoing basis to
ensure that the reinsured business was conducted in accordance
with appropriate standards.
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