-8-
petitioner’s pricing and reserving are “conservative by industry
standards”. The 1994 and 1995 Best reports also state:
“Somewhat offsetting these positive rating factors is a
concentration of underwriting risk as the company is primarily a
one state, one line writer and is subject to changes in insurance
regulation and judicial climate."
The 1995 Best report states:
Favorable underwriting gains continued for the
tenth consecutive year in 1995, despite a high
frequency claim year. Underwriting income benefitted
from the take down of approximately $3 million of
redundant reserves from prior report years. This
reduction has been a consistent pattern since 1987.
[Emphasis added.6]
Additionally, in regard to petitioner's reserve quality, the
1995 Best report concludes:
The company's carried loss reserve position is
strong, with significant accident year redundancies
recorded over the last ten years reflective of the very
conservative reserving practices and commitment to
reserve adequacy. Management believes that
professional liability is a very volatile line of
business, so they reserve very conservatively in the
early years of development and retire any redundant
reserves after claims are more seasoned and
predictable. Given the volatility and the low
mathematical credibility of the company's development
patterns this course of action insures that reserves
set aside by report year will be adequate to cover
future development. Therefore, despite annual
reductions on old report years, the company continues
to be very conservatively reserved. [Emphasis added.]
6 Similarly, the 1994 Best report states: “Bulk reserves on
years prior to 1994 which were deemed redundant were reduced by
$1.7 million last year. This take down of reserves has been a
consistent pattern since 1987.” (Emphasis added.)
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