§ 4117. Loss and loss expense reserves. (a) In determining the
financial condition of any property/casualty insurance company for the
purpose of applying the provisions of this chapter, and in any financial
statement or report of any such company, there shall be included in the
liabilities of such company loss reserves and loss expense reserves at
least equal to the amounts required under the provisions of this
section, and the amount of such reserves shall be diminished by
allowance or credit for reinsurance recoverable from assuming insurers
in accordance with paragraph nine of subsection (a) of section one
thousand three hundred one of this chapter. The date as of which such
determination, statement or report is made is hereinafter referred to as
the date of determination.

(b) For all outstanding losses and loss expenses, the reserves shall
include the following:

(1) the aggregate estimated amounts due or to become due on account of
all known losses and claims and loss expenses incurred but not paid,
including the estimated liability on any notice received by the company
of the occurrence of any event which may result in a loss;

(2) the aggregate amounts of liability for all losses and loss
expenses incurred but on which no notice has been received, estimated in
accordance with the company's prior experience, if any, otherwise in
accordance with the experience of similar companies under similar
contracts of insurance. The estimated liabilities for such losses under
all its bonds, policies or contracts of fidelity insurance, shall be not
less than ten percent of the net premiums in force thereon, and the
estimated liabilities for all such losses under all its surety contracts
shall be not less than five percent of the net premiums in force
thereon.

(c) Except as provided in subsection (e) hereof the minimum reserves
for outstanding losses and loss expenses under policies of personal
injury liability insurance and under policies of employers' liability
insurance, where the losses were incurred during the three years
immediately preceding the date of determination, shall be calculated in
accordance with any method adopted or approved by the National
Association of Insurance Commissioners and shall be not less than the
aggregate of the estimated unpaid losses and loss expenses for claims
incurred computed in accordance with subsection (b) hereof.

(d) The minimum reserves for outstanding losses and loss expenses
under policies of workers' compensation insurance, except as provided in
subsection (e) hereof, shall be computed as follows:

(1) For all such compensation policies where losses were incurred more
than three years prior to the date of determination, such reserves shall
be the sum of the present values, at five percent interest per annum, of
the determined and estimated unpaid losses computed on an individual
case basis plus the estimated unpaid loss expenses computed in
accordance with subsection (b) hereof.

(2) Where losses were incurred during the three years immediately
preceding the date of determination, such reserves shall be the sum of
the reserves for each year, which shall be calculated in accordance with
any method adopted or approved by the National Association of Insurance
Commissioners and shall be not less than the sum of the present values,
at five percent interest per annum, of the determined and estimated
unpaid losses computed on an individual case basis plus the estimated
unpaid loss expenses computed in accordance with subsection (b) hereof.

(e) Whenever in the judgment of the superintendent, the loss and loss
expense reserves of any property/casualty insurance company doing
business in this state calculated in accordance with the foregoing
provisions are inadequate or excessive, he may prescribe any other basis
which will produce adequate and reasonable reserves.

(f) Every property/casualty insurance company doing business in this
state shall keep a complete and itemized record showing all losses and
claims on which it has received notices including all notices received
by it of the occurrence of any event which may result in a loss.

(g) (1) Effective with the nineteen hundred ninety annual statement,
every licensed property/casualty insurer required to file such annual
statement with the superintendent by the following April first, shall,
unless exempted by the superintendent, engage a qualified independent
loss reserve specialist for the following year to render an opinion as
to the adequacy of its loss and loss adjustment expense reserves when
two of three of such insurer's results of its loss and loss adjustment
expense ratios as indicated below are outside of the indicated
acceptable ranges:

(A) One Year Reserve Development to Surplus

Add the year-end estimate of the losses that were outstanding one year
earlier to the payments on those losses made during that year. The
difference between that sum and the reserves that were established at
the end of the prior year is the one-year reserve development. The ratio
of one-year reserve development to prior year's surplus is the
deficiency or redundancy. The acceptable range is less than twenty-five
percent deficiency. Any redundancy is acceptable.

(B) Two Year Reserve Development to Surplus

Add the year-end estimate of the losses that were outstanding two
years earlier to the payments on those losses made during those two
years. The difference between that sum and the reserves that were
established at the end of the second prior year is the two-year reserve
development. The ratio of two-year reserve development to the second
prior year's surplus is the deficiency or redundancy. The acceptable
range is less than twenty-five percent deficiency. Any redundancy is
acceptable.

(C) Estimated Current Reserve Deficiency to Surplus

For the last two years the reserves as stated in those years are
adjusted by the one-year or two-year reserve development as calculated
in the above two ratios. This total is then divided by the net premium
earned in the appropriate year to obtain the developed reserve to
premium ratio. The estimated reserves required is the current net
premium earned multiplied by the average ratio between developed
reserves and earned premium for the last two years. The estimated
deficiency is the difference between the estimated reserves required by
the company and the actual reserves maintained. The estimated current
reserve deficiency or redundancy is taken as a percentage of surplus and
the acceptable range is less than twenty-five percent deficiency. Any
redundancy is acceptable.

(2) Such opinion shall be submitted by the qualified loss reserve
specialist to the insurer and the superintendent, by such date
established by the superintendent. For the purposes of this section, a
"qualified independent loss reserve specialist" shall mean a person who
is not an employee, principal or director or indirect owner of the
insurer and is a member of the Casualty Actuarial Society, or has such
other experience as is acceptable to the superintendent to assure a
professional opinion on the adequacy of loss and loss adjustment expense
ratios.

(3) Nothing in this subsection shall be construed to restrict or
diminish any right or power of the superintendent under any other
provision of this chapter.

(4) The superintendent shall keep the contents of each report made
pursuant to this subsection and any information obtained in connection
therewith confidential and shall not make the same public without the
prior written consent of the insurer to which it pertains unless the
superintendent after notice and an opportunity to be heard shall
determine that the interests of policyholders, shareholders or the
public will be served by the publication thereof.