The MIIX Group, Inc. has advised the New Jersey Department of Banking and Insurance of the need to increase its loss and allocated loss adjustment expense (ALAE) reserves based on the progress of the annual audit to date.
The required adjustment is not yet certain. It will depend upon the extent to which the company’s loss experience in FY2003 was attributable to continuing high severity and frequency of claims as contrasted with the acceleration of claims in light of the Company’s runoff status.
Because of the complexities in analyzing acceleration, the company continues to examine this aspect of its runoff. The company expects to complete its analysis by mid-March when its earnings release is issued. The increase in reserves, given the company’s marginal surplus levels, will have a materially adverse effect on the company.
The company expects to delay filing its statutory financial statements to the extent permitted by the Department in a pending request for extension.
Further, the company has entered into discussions with its reinsurers regarding possible commutations of treaties for some or all years. If the company is unable to successfully negotiate commutations, the reinsurers are likely to seek to increase premiums payable by the company if the company records a significant reserve adjustment or falls short of other stipulated contract provisions, including the failure to maintain appropriate trust fund balances. Such increases could, depending on their amounts and timing, materially and adversely affect the company.
The Department, required to approve all treaty changes, is being kept advised of these discussions.
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