State-Run Medical Malpractice Fund Accused of Withholding Funding From Healthcare Providers

I am a certified financial examiner, a certified public accountant, and served as chief state financial examiner. I was an insurance regulator for almost 30 years, and my tasks included the analysis of all types of insurance companies, including malpractice companies and including the reserves for such companies. I reviewed reserves of companies in the process of financial examinations to determine their financial condition, as well as reviewed the results of actuaries who reviewed or prepared/set reserves.

To determine adequate reserves is a very complex area, but to put it simply, there are two main ways to review adequacy: 1) review the development of an entity’s claims over time, on a year-to-year basis to determine if the previous reserve development was adequate or was understated. From this you can also impute forward possible redundancies or deficiencies based on past trends. Or 2) compare an entity’s reserve development (adequacy) to industry experience. This is often done in a situation where an entity may be young and not have extensive experience. So lacking one’s own experience, you look at the industry as a whole as to how much reserves need to be established for specific types of claim reserves.