Financial Resources and Operational History of NIAC

NIAC's application stated that in 1998, NIAC's net income was $1,400,078, which was all retained to increase NIAC's surplus to $6,465,024 at the end of the year. NIAC's surplus is a combination of members' equity of $5,165,024 and subordinated debt of $1,300,000. In 1998, NIAC's net written premium was $9,572,773. During its 10 years of operation, NIAC has increased its surplus from $1,300,000 to $6,465,024. By the end of 1999, NIAC expected its surplus to exceed $8,000,000. NIAC's 1997 and 1998 consolidated balance sheets are Attachment A to this decision.

NIAC further states that since its inception in 1989, NIAC has handled 3,433 claims. Of these claims, 80% are closed. The vast majority of open claims are small auto claims that resolve in a few months or less. Only 30 claims remain open that are sizeable enough to have been reported to reinsurers for possible participation. Only seven of those claims are auto-related. NIAC routinely surveys member-insureds regarding their satisfaction with each claim.

NIAC's application stated that in its normal course of business, it also reinsures with other companies to limit NIAC's loss on large claims. During 1998, NIAC retained the first $100,000 of each claim (including defense and indemnity). During 1999, NIAC retained the first $150,000 of each claim (including defense and indemnity). Above $150,000 to policy limits, NIAC is reinsured by General Reinsurance and by Swiss Reinsurance.