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insuring all losses from occurrences in the policy year to
insuring only those losses that resulted in claims made during
the year.
During January 1987, Mr. Biscoglia estimated that the
general and professional liability reserves needed as of yearend
1986 were in a range between $218 million and $250 million, on an
undiscounted basis, and in a range between $176 million and $203
million, on a discounted basis. Subsequently, Mr. Klaassen was
asked to give a second opinion regarding the reserves for
professional liability losses and loss expenses evaluated as of
December 31, 1986, and he recommended reserves for Parthenon and
PCIC of approximately $221 million on an undiscounted basis and
$182 million on a discounted basis. Mr. Klaassen also suggested
an undiscounted value of $259.7 million, or $202.4 million on a
discounted basis, if Parthenon wanted an 80 percent probability
that the reserve would be adequate. Mr. Klaassen did not know
that Parthenon had adopted a claims-made policy for the 1986
policy year. Had he known, the portion of his estimate
attributable to the 1986 occurrences would have been reduced by
about 65 percent.
During February 1987, Parthenon requested and received
permission from the Department of Insurance to reduce the amount
of the 1986 reserves for losses and expense payments that it was
required to fund by discounting its professional liability
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