-19- April 19, 1996, petitioner again increased its retention levels to include 15 percent of losses greater than $250,000, up to $500,000. In a newsletter to policyholders dated September 1996, Bixler explained these changes in its reinsurance philosophy as follows: If certain reinsured layers are relatively predictable and the company’s financial strength can readily absorb unusual activity in those layers, then it may be advisable for the company to retain that portion instead of buying reinsurance on it. * * * * * * [Petitioner] has pursued a strategy of surplus growth and will soon achieve our immediate goal of $20,000,000. Meanwhile, we have had the opportunity to observe the loss activity in each band of risk and have found many of the lower layers to be relatively stable under various conditions over several years. Therefore, * * * [petitioner] has progressively assumed a larger share of risk on each claim over the past few years. For annual statement purposes, petitioner’s unpaid loss reserves were shown both gross and net of estimated reinsurance proceeds recoverable. Similarly, petitioner’s appointed actuaries computed both gross and net unpaid loss reserves but netted out larger amounts of estimated reinsurance proceeds recoverable than did petitioner.16 The differences in petitioner’s estimates of reinsurance proceeds (as reflected on schedule F of its annual statements) and the actuaries’ estimates (as indicated by the difference between the actuaries’ 16 The record does not explain these variances.Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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