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Insurance companies use "statutory accounting" principles to
prepare their annual statements. Statutory accounting principles
are conservative and focus on maintaining the solvency of an
insurance company to protect insurance consumers.
UDI required that annual statements due after December 31,
1991, be accompanied by an actuarial opinion concerning the
reasonableness of the insurance company's reserves. The
actuarial firm of Tillinghast Towers Perrin (Tillinghast)
certified to UDI that petitioner's reserves for unpaid losses
shown on its 1991 and 1992 annual statements were computed in
accordance with accepted loss reserving standards and were fairly
stated in accordance with sound loss reserving principles, were
based on factors relevant to policy provisions, met the
requirements of the insurance laws of the State of Utah, and
provided sufficiently for all of petitioner's unpaid loss and
loss expense obligations.
E. Reserves for Unpaid Losses
On their annual statements, property and casualty insurers
are required to report estimates of amounts they expect to pay
for losses2 that have already occurred (unpaid losses) and
related loss adjustment expenses. These estimates are known as
2 A loss is an injury sustained by a person who has a right
to hold the insured liable for that injury. A loss is incurred
when the event insured against occurs. Ocean Accident & Guar.
Corp. v. Southwestern Bell Tel. Co., 100 F.2d 441, 446 (8th Cir.
1939).
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