Subscribers who have followed my messages in the past three Annual Reports know that the Exchange is in the midst of a difficult transition from its roots as a fraternal benefit society toward an end state that represents a fundamental reshaping of the company. The intent is to retain to the extent possible the service ethic and membership focus that are the core of the original charter while placing primary emphasis on the ability to manage operational risk. Therefore, it is essential that the organization adopt a more commercially focused set of operational goals than has been the case heretofore. Our strategic imperatives remain unchanged: properly price the risks assumed by the Exchange; effectively manage both the individual and aggregate risk in the book of business; improve the efficiency of insurance operations to control costs and lastly, change the culture of the organization to institutionalize these changes in the company.

That formidable issues attend the accomplishment of these ends should come as no surprise; many are of such consequence that a failure to effectively address them could well threaten the solvency of the company. As the Subscribers’ Advisory Committee (SAC) and management work to resolve these issues, the principle of equitable sharing of the aggregate risk among the subscribers severally is the touchstone. By definition the company exists to facilitate the “…exchange of contracts of insurance among the subscribers.” We are all participants in the process and parties to the contracts. Each subscriber rightly expects that the contracts to which he is obligated by the Subscriber’s Agreement fairly and equitably distribute the assumed risk so as to provide no advantage or disadvantage to one subscriber over another or to the membership as a whole.