Special Report - Loss Portfolio Reinsurance Transfers.

January 31, 1984 SUBJECT: INSURANCE CIRCULAR LETTER NO. 3 (1984) WITHDRAWN TO: ALL INSURERS AUTHORIZED OR ACCREDITED TO TRANSACT FIRE, MARINE, CASUALTY AND SURETY INSURANCE OR REINSURANCE IN THIS STATE RE: SPECIAL REPORT LOSS PORTFOLIO REINSURANCE TRANSFERS Recent industry related news and trade reports indicate that increasing numbers of insurers may be entering into loss portfolio reinsurance transfers which result in an increase in the ceding company's surplus to policyholders on the basis of a portfolio loss reserve transfer at a cost or consideration less than the amount of loss and loss adjustment expense reserves ceded. In specific situations coming to the Department's attention, the ceding insurer has been required to segregate unearned surplus by a write-in item on page 3 of the statutory statement in the amount of the surplus gain from the transfer. In those circumstances, the surplus gain from the transaction is not to be considered as retained profit until such time as the actual liabilities transferred resulting in the surplus gain, are being recovered, or have been eliminated. In recognition of the Department's concern that such loss portfolio reinsurance transfers may be hazardous to policyholders, and citizens of this state, the Department is hereby requesting pursuant to Section 27 of the New York Insurance Law, a special report to be completed in the form of the attached Exhibit and returned with the signature of a principal officer of the insurer subscribed thereto. If no such loss portfolio reinsurance transfer has been entered into, so state on the attached Exhibit and return with the signature of a principal officer of the insurer subscribed thereto. The Exhibit should be completed and returned to the attention of Mr. Mario Carfi, Chief Examiner, Property Companies Bureau, within forty-five days of the receipt of this letter. Very truly yours, [SIGNATURE] JAMES P. CORCORAN Superintendent of Insurance enc. Exhibit of Loss Portfolio Reinsurance Transfers Ceded Assumed A. Initial Reserves Transferred Losses $________ $_________ Loss adjustment expenses __________ __________ Total $__________ $__________ B. Consideration paid or received (amount) recorded as Premiums written ceded/assumed $__________ $__________ Losses paid/payable __________ __________ Total $__________ $__________ C. Remaining Reserves as of December 31, 1983: Losses $__________ $__________ Loss adjustment expenses __________ __________ Total $__________ $__________ D. Incurred year(s) of Losses transferred: E. Lines of business subject to Loss Portfolio Reinsurance Transfer F. Identify the assuming insurer(s) under each such Loss Portfolio Reinsurance Transfer entered into and the execution and effective date thereof. G. Identify the ceding insurer(s) under each such Loss Portfolio Reinsurance Transfer entered into and the execution and effective date thereof. Signature_________________________ Principal Officer Title__________ Reporting Insurer__________________