Utah Medical Insurance Association - Page 16

                                         -16-                                          
                                       Percentage change from                         
               Year ending              preceding year or period                       
               12/1/79             -5.0%                                               
               12/1/80             12.1                                                
               12/1/81             11.8                                                
               12/1/82             24.6                                                
               12/1/83                  14.9                                           
               12/1/84             42.0                                                
               12/1/85             67.0                                                
               12/1/86             30.5                                                
               12/1/87             4.5                                                 
               1/1/89              2.6                                                 
               1/1/90                              0.0                                 
               1/1/91              -3.2                                                
               1/1/92         -13.6                                                    
               7/1/92         -7.0                                                     
          I.   Reinsurance                                                             
               During the years at issue, petitioner bought reinsurance12              
          coverage for losses falling in a certain loss "layer"; i.e., for             
          losses and allocated loss adjustment expenses in excess of a                 
          certain minimum and below a certain maximum per loss.                        
          Petitioner's reinsurance treaty13 during the years at issue                  
          covered losses from $300,000 plus an indexed amount to a maximum             
          of $1 million per loss.  The indexed amount equaled the product              
          of (a) $25,000, and (b) the number of "December 31sts" occurring             

               12 Reinsurance is an agreement between an insurer (the                  
          ceding company) and a second insurer (the reinsurer), under which            
          the ceding company passes to the reinsurer some or all of the                
          risks that the ceding company assumes through the direct                     
          underwriting of insurance policies.  See Trans City Life Ins. Co.            
          v. Commissioner, 106 T.C. 274, 278 (1996).                                   
               13 A reinsurance treaty is a contract between two insurers              
          in which the reinsurer agrees to provide coverage of risks that              
          the primary insurer has already assumed under an insurance                   
          contract with another party.  See Trans City Life Ins. Co. v.                
          Commissioner, supra.                                                         




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Last modified: May 25, 2011