6/2009 Transfer of direct P&I business to Gard P. & I. (Bermuda) Ltd

Circular No. 06/2009 October 2009

To the Members of Assuranceforeningen Gard - gjensidig

Dear Sirs,

Re:Transfer of direct P&I business to Gard P. & I. (Bermuda) Ltd

Introduction

At the meetings held in Athens on 24 and 26 October 2009, respectively, the Boards of Directors of Assuranceforeningen Gard - gjensidig ("Gard Norway ") and Gard P. & I. (Bermuda) Ltd ("Gard Bermuda") agreed to transfer a major part of the direct P&I business from Gard Norway to Gard Bermuda with effect from the commencement of the 2010 policy year.

With the consent of the Board of Directors of Gard Bermuda we are pleased to outline the structural changes with regard to direct P&I business below.

Background

Gard Norway is currently the direct insurer of the bulk of the P&I business but has ceded by way of reinsurance 85 per cent of its retained risk, i.e. the proportion of insurance liabilities not reinsured elsewhere, to Gard Bermuda under a quota share reinsurance agreement.

Gard Bermuda is a mutual insurance association founded in Bermuda in 1988. The Members of Gard Norway are automatically Members of Gard Bermuda [1]. Thus, the two associations are sister associations inasmuch as they are owned by the same membership, although the business of Gard Bermuda has until now principally consisted of reinsurance of its sister association, Gard Norway .

During the last years Gard Bermuda has become the financial centre of gravity among the companies within the Gard Group.

Transfer of direct business to Gard Bermuda - what does it mean in practice?

The transfer of the bulk of Gard Norway 's direct P&I business to Gard Bermuda will be implemented with effect from 20 February 2010. Members will be given renewal offers from Gard Bermuda through Gard AS acting as agent in the same way as Gard AS is acting as agent for Gard Norway today. The point of contact in Gard AS will be the same as in the past. The structural change will not in itself affect the day to day communication and relationship between the Member and the Club.

Gard Norway will remain liable for liabilities that have arisen or that will arise in the future under existing and past contracts of insurance.

Better utilization of financial resources

The principal reason for the change is to create a structure that will contribute to a better utilization of the combined financial resources of the companies within the group to the benefit of Members and clients.

The effect of a shift of the bulk of the direct P&I business from Gard Norway to Gard Bermuda is in reality to bring a larger proportion of the policy holders closer to the financial centre of gravity in the group. However, Gard Bermuda and Gard Norway will technically still have the same membership through a mutual reinsurance arrangement between the two associations

Norwegian platform and identity to be maintained

The structural change as outlined above does not mean that that the level of activities to be performed out of the offices in Norway will be reduced or scaled down. Day to day work with regard to underwriting, claims handling and the required support and back office functions will still be performed by Gard AS on behalf of Gard Bermuda in the same way as Gard AS performs the same functions as agent for Gard Norway and Gard Marine & Energy Limited today.

This means that Gard Bermuda will be deemed to do business in Norway through a so-called permanent establishment. This requires the establishment of a branch of Gard Bermuda in Norway . An application has already been filed with the Norwegian Financial Supervisory Authority for the purpose of being given permission to establish the branch with Gard AS as the general agent.

A part of the direct P&I business will still be operated through Gard Norway for various reasons. The most important reason is to keep Gard Norway as a vehicle within the EU/EEA area for the purpose of taking advantage of the EU/EEA insurance legislation with regard to the freedom to provide cross border services.

Thus, the Norwegian identity and heritage will be preserved and be the platform for further development of Gard.

Any questions with regard to these matters can be directed to Senior Vice President Kjetil Eivindstad.

Yours faithfully,

GARD AS As agent only for Assuranceforeningen Gard - gjensidig -

Claes Isacson Chief Executive Officer