-3- State-Imposed Requirements Since its incorporation in 1981, petitioner has been regulated by the Minnesota Department of Commerce (the department). Petitioner's affairs, practices, and financial condition are periodically subject to examination by the department’s insurance division. Each year, petitioner is required to file with both the department and the National Association of Insurance Commissioners (NAIC) a copy of its NAIC annual statement, and to deliver a statement of actuarial opinion regarding the adequacy of its reserve levels. At all times relevant to this case, petitioner complied with these requirements. Throughout its existence, petitioner was required under Minnesota State law to maintain a minimum surplus of $1 million.1 Petitioner’s Early Financial Problems and Remedial Actions Between 1982 and 1985, petitioner’s reported surplus deteriorated from $1,433,544 to $1,011,148. Petitioner’s audited financial statements for 1985, issued by Ernst & Whinney on May 10, 1986, restated petitioner’s December 31, 1985, surplus as $7,995 and noted that petitioner did not meet the surplus level required by Minnesota statutes. 1 Petitioner's surplus is the excess of its assets over its liabilities, which include the amounts estimated to be necessary to satisfy its obligations for unpaid losses and allocated loss expenses. As a liability item on petitioner's balance sheet, its loss reserves directly reduce petitioner's surplus.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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