PROPOSED PLAN FOR THE DISSOLUTION OF THE MEDICAL MALPRACTICE INSURANCE ASSOCIATION ("MMIA") SUBMITTED BY:

Transfer of all current known and unknown loss and allocated loss adjustment expense, unearned premium reserve, and death, disability and retirement liabilities in the form of a reinsurance contract with the American Home Assurance Company

Reinsurance Aggregate Limit: Option A: $625,000,000
                                             Option B: Nominally None; Effectively $625,000,000

Transfer of all other liabilities reflected on the MMIA statutory balance sheet as of the transfer effective date.

Payment for all liabilities, other than loss and allocated loss adjustment expenses, are subject to a $10,000,000 sub-limit.

Option A: $454,245,000

Option B: $456,000,000

Amounts above the reinsurance aggregate limit.

Legislation needed to allow MMIA to remain open as a viable entity subsequent to August 31, 2000, for an unspecified period of time in order to properly execute the necessary reinsurance policies, and maintain a facility for the acceptance of certain potential future assets.

For Option B, a fully and properly executed interest bearing (at 8.5%) promissory note, collateralized in an amount to be determined, from the State of New York is required. Terms of the note shall require payment to American Home for any and all amounts paid for loss and/or loss adjustment expenses in excess of $625,000,000.

If insufficient assets in MMIA to purchase reinsurance, American Home would accept an interest bearing (8.5%) fully collaterized promissory note from New York State.

AIG Claims and Technical Services would run-off current claims and handle all future claims.

Not part of this proposal.

Suggests possible structures:

All insurers "take all comers" at assigned risk rates where necessary;

Unacceptable voluntary risks assigned to insurers at assigned risk rates.

MMIA remains open, in runoff, until it can maximize the valuation and collectability of all assets.

Upon maximizing asset valuation, novate the policyholder liabilities of MMIA through a merger into a New York licensed Special Purpose Insurance Company ("SPIC").

SPIC will purchase reinsurance for policyholder liabilities from a Swiss Re Group carrier, at a cover limit equal to an amount determined by the Superintendent of Insurance.

To be determined at the effective date of the reinsurance, reflecting changes in reserving and interest rates, and payment factors at that date.

Any liabilities above the reinsurance coverage limit.

Legislation to continue MMIA (at the Superintendent’s discretion) to maximize the valuation and collectability of all assets.

None

While MMIA remains open in runoff, MMIA will handle claims. When MMIA is merged with the SPIC, a service company/general agency would be formed to manage the run-off of MMIA liabilities on behalf of the SPIC.

A licensed Swiss Re Group company will write new and renewal medical malpractice business on and after July 1, 2000 on a "take all comers" basis for at least 5 years.

The service company/general agency formed to runoff MMIA liabilities would also underwrite and perform claims management for this company.

Assumption of Liabilities (Loss, Loss Adjustment Expenses, and Prepaid Tail) of MMIA.

MMIA insureds will be advised to report all new claims to MLMIC.

$373,400,00, to be increased by an interest charge, at a 6% annual interest rate compounded monthly, to the extent that payment is remitted after July 1, 2000.

MMIA’s obligation for other costs related to termination of operations.

None proposed.

None

MLMIC’s claims personnel will handle claims. When and if a potential conflict of interest arises, as when a suit involves both a MLMIC and MMIA policyholder, separate claims personnel will be assigned, from separate claims units, with separate supervisory and clerical staff. Separate defense counsel will be assigned to represent each insured.

Insureds of MMIA will be offered the opportunity to apply for coverage with MLMIC, and insureds meeting MLMIC’s underwriting standards will be accepted, using MLMIC’s rates and rating plan.

Does not propose providing coverage for insured’s who do not meet MLMIC’s underwriting standards.

MMIA continues in runoff long enough to collect its tax refund.

Upon receipt of tax refund, MMIA will merge into a New York domiciled stock property/casualty insurer ("Finality Vehicle"). MMIA’s existing policyholder liabilities will be novated by this merger, with Finality Vehicle responsible for all claims incurred until loss portfolio transfer can be purchased.

Loss portfolio transfer purchased for remaining liabilities as soon as possible after merger and novation.

To be determined at the time of loss portfolio transfer

Liabilities above the loss portfolio transfer aggregate limit.

Legislation to permit MMIA to continue in run-off

Legislation to permit the merger of MMIA in run-off into a New York property/casualty insurer, such as Finality Vehicle.

Legislation to require MMIA in run-off to pay to the hospital excess malpractice pool the amount, in excess of the stabilization reserve fund, needed for the premium for the 2000 – 2001 policy year

It is anticipated that the Swiss Reinsurance America Corp. will partner with MMIA is this proposal, both in organizing the Finality Vehicle and providing the loss portfolio transfer.

Additional funds will be available from MMIA in run-off to pay any amounts needed above the stabilization reserve fund to pay for the physicians excess insurance program for the 2000 – 2001 policy year.

Should the loss portfolio transfer ultimately prove to be insufficient, Finality Vehicle policy obligations would have to be covered by the Guaranty Fund.

A service company will be organized to offer claim and administrative services to MMIA in run-off and Finality Vehicle/the reinsurer providing the loss portfolio transfer. This servicing company may employ former employees of the MMIA.

A licensed Swiss Reinsurance America Corp. company will write new and renewal medical malpractice business on and after July 1, 2000 on a "take all comers" basis for at least 5 years. Forms and rating plans will be similar to those used by MMIA, along with rate schedules mutually agreed upon by the insurer and the Insurance Department.

The service company organized to handle claims for the runoff companies (MMIA and Finality Vehicle) will also provide administrative, underwriting, reinsurance, claims and investment services, as requested, by the Swiss Reinsurance America Corp. company.

The State Insurance Fund will acquire or create a company ("NEWCO") to assume all contractual policyholder obligations and all rights to receivables and assets arising under insurance contracts issued by MMIA.

$500,000,000, payable from MMIA to NEWCO

Obligations other than policyholder obligations

Legislation is required to keep MMIA open to recover tax refund and other claims, and to provide a method for the potential repayment of any loans from the State Insurance Fund.

Legislation also required to reorganize the Board of Directors of MMIA into a 3 director Board, with one director appointed by the State Insurance Fund.

If MMIA does not have sufficient assets to pay the $500,000,000, the State Insurance Fund from time to time will loan sufficient monies to NEWCO, with interest.

These loans must be unconditionally guaranteed for payment by MMIA

MMIA’s guarantee must be secured by any right or claims available to MMIA including but not limited to any right to payment of encumbered funds.

MMIA will transfer any tax refunds to NEWCO to satisfy loan to State Insurance Fund

Potential assessment to members of MMIA if there are not sufficient funds to satisfy the loan to the State Insurance Fund.

To the extent cash and admitted assets of NEWCO are in excess of liabilities and operating expenses, determined effective five years subsequent to the closing date, NEWCO will remit 50% of such excess assets to New York State

Claims will be handled by NEWCO. May use some of the existing staff members of the MMIA as it deems necessary.

NEWCO will provide coverage with coverage substantially similar to that presently provided under MMIA’s policy forms on forms and rates filed by NEWCO and approved by the Superintendent.

MMIA continues in run-off to preserve tax assets in course of recovery and to provide a recipient for reinsurance coverage. MMIA’s name is changed to MMIA in Run-Off ("MMIAIRO").

One or more members of the Zurich Financial Services Group will provide reinsurance of MMIAIRO.

There will be an aggregate limit for the reinsurance of $800,000,000, to cover Loss Reserves, and ALAE, Unearned Premium Reserve and untriggered claims made tail coverage.

ULAE is responsibility of reinsurers but does not erode the aggregate limit.

$600,000,000 to $650,000,000 estimate

Any policyholder obligations, other than ULAE, in excess of the $800,000,000 aggregate limit.

Any legal fees, severance costs or other administrative expenses that are expended in establishing and maintaining MMIAIRO.

Any liabilities that derive from non-policy specific sources.

Legislation to allow for new MMIAIRO

If sufficient assets are not available to purchase reinsurance, will consider a structured payment schedule combining cash up-front and additional payments over time.

Other sources of funding for premium might be needed, such as:

Assessments;

Temporary franchise taxes;

Cession of losses over a threshold to a security fund or residual market; or

New York State provides funding (e.g., through bonds).

Provision for possible profit sharing to New York State based on the balance of an experience account to be established.

Reinsurers would pursue the tax recoverable on behalf of MMIARO

The reinsurers and The Doctors’ Company would supervise claim settlement for MMIAIRO.

Reinsurers anticipate offering jobs to key claim personnel at MMIA

Timely payments from the reinsurers will be made to MMIAIRO. Claimants will receive checks and money wires drawn from MMIAIRO accounts

Underwriter For The Professions Insurance Company ("UFTPIC") will provide coverage. UFTPIC, domiciled in Colorado and admitted in New York, is a subsidiary of The Doctors’ Company.

Coverage for the first year would be based on what would have been in effect for MMIA.

Will require pre-approval for the following year of a rating program that would permit

Average manual rate increases of between 50% and 75%;

The ability to rate each risk individually;

The ability to develop manuscript endorsements

The ability to apply scheduled credits and unlimited debits to the manual rates;

The ability to impose involuntary deductibles

UFTPIC is considering the use of existing MMIA infrastructure including some physical assets and MMIA staff.