Composition of the Committees, Review of policy years, Premium rating for the 2003 policy year, Gard P&I Half Year Status report as at 20 August 2002 (28 October 2002)

Circular No. 2/2002 October 2002

TO THE MEMBERS OF ASSURANCEFORENINGEN GARD -gjensidig-

Dear Sirs

COMPOSITION OF THE COMMITTEES REVIEW OF POLICY YEARS PREMIUM RATING FOR THE 2003 POLICY YEAR GARD P&I HALF YEAR STATUS REPORT AS AT 20 AUGUST 2002

Introduction

This document highlights the decisions taken at the meeting of the Committee of Assuranceforeningen Gard -gjensidig- (the Association) held in Lisbon on 28 October 2002. As to the developments of closed and open policy years a fuller report will be found on our website www.gard.no.

Composition of the Committees

The Committee At the Association's Annual General Meeting, which took place on 16 August 2002 in Arendal, the following new members were elected to the Committee:   Jane Sy, *Stolt-Nielsen Transportation Group Ltd, Rotterdam Abdulaziz K. Al-Hashimi, Saudi Arabian Oil Company, Dhahran** vind O. Larsen, The J. J. Ugland Companies, Grimstad   The following persons retired from the Committee during the year or at the Annual General Meeting: Axel C. Eitzen, Tschudi & Eitzen Holding AS; Paul O'Brien, Stolt-Nielsen Transportation Group Ltd; Jamal A. Al-Rammah, Saudi Arabian Oil Company; and Lars T. Ugland, the J. J. Ugland Companies.   At the meeting held in Lisbon on 28 October 2002 the Committee re-elected Leif Terje Løddesøl of Wilh. Wilhelmsen ASA, Oslo, as its Chairman and Stephen Pan of World-Wide Shipping Agency (S) Pte. Ltd., Singapore, as its Vice Chairman.

The Executive Committee The Annual General Meeting held on 16 August 2002 elected

Axel C. Eitzen, Tschudi & Eitzen Holding AS, Oslo

as a new member of the Association's Executive Committee. There were no other changes as to the composition of the Executive Committee.

At the meeting held on 26 September 2002, the Executive Committee re-elected John Hatleskog of Havinvest A/S, Oslo, as its Chairman. Dieter Ostendorf of Aug. Bolten Wm. Miller's Nachfolger, Hamburg, was elected as the new Vice Chairman of the Executive Committee.

Review of policy years Closed years

Closed years up to and including the 1998 policy year progress somewhat better than projected.   1999 policy year closed The Committee decided to close the 1999 policy year without ordering a further Supplementary Call.

Open policy years

The 2000 and 2001 policy years are likely to be closed in October 2003 and 2004 respectively without further Supplementary Calls being levied.   The 2002 policy year - the first six months of the year have seen a reduction in reported claims compared with the previous two years. The reduction is first and foremost a result of the absence of large claims during the period to 20 August 2002.

Release Calls

The Committee resolved that the Release Calls for open policy years be set as follows:   For the 2000 policy year: nil For the 2001 policy year: 25 per cent For the 2002 policy year: 50 per cent For the 2003 policy year: 50 per cent

Premium policy for the 2003 policy year

Change in terminology in respect of mutual premiums and calls The Committee decided to adopt a new terminology with regard to mutual premiums and calls. Hereafter the estimated total call (ETC premium) for a mutual entry at the commencement of the policy year will consist of the two elements, the Advance Call and the Deferred Call. If premium in excess of the ETC premium is required in respect of a policy year, then the term Supplementary Call will be used to describe such premium. In practice the term Deferred Call corresponds to the existing forecast Supplementary Call determined prior to the commencement of the policy year.   The new terminology will come into force on 20 February 2003 and will, thus, apply for the 2003 policy year. For that reason the section of this circular dealing with the premium policy for next policy year is based on the new terms. Further details about the Rule changes will be published in a separate circular.

Mutual entries

In light of the Associations financial strength, the likely increase in shipowners' reinsurance costs and the uncertain outlook for shipping, the Committee decided that the general increase for 2003 should be set no higher than necessary. Accordingly, the Committee resolved that there be a 15 per cent general increase in the Advance Calls for both P&I and FD&D in respect of mutual entries. The Deferred Call (previously forecast Supplementary Call) for mutual entries is set at 25 per cent of the Advance Call.

In addition separate adjustments in the premium rating will be made reflecting likely increases in the costs of the International Group and the Association's own reinsurance programs for the 2003 policy year. As is customary, in addition to the general increase, Members' premium rating will be reviewed in the light of their individual loss records and other relevant factors. Further details about the International Group and the Association's reinsurances for the 2003 policy year will be published later.

Fixed premium entries

There will also be a general increase of premiums for Charterers' entries and other fixed premium products. The level of premium for these fixed premium products will depend on the individual Member's loss record and market conditions, including the requirements of the Association's reinsurers.

Individual premium rating

Each Member's ETC premium will, as usual, be assessed individually in the light of his loss record and the cost of reinsurance. All Members will receive shortly the loss record for their respective fleets.

Members who have not heard from the Association by 20 January 2003 may assume that there will be no changes in the premium rating for next year save for adjustments based on the general increase and variations in the reinsurance costs.

Gard P&I - half year status report as at 20 August 2002

Tonnage

Total tonnage entered as at 20 August 2002 was 100.9 million GT of which owners' entries represented 60.6 million GT. Comparable figures as at 20 February 2002 were 97.7 million GT and 60.2 million GT respectively.   Balance available for outstanding and unreported claims - general contingency reserve As at 20 August 2002 the balance available to meet outstanding and unreported claims amounted to USD 649 million, of which the general contingency reserve represented USD 217 million. Comparable figures as at 20 February 2002 were USD 626 million and USD 195 million respectively. The increase in the contingency reserve is a result of an estimated surplus for the 2002 policy year at six months from inception, a reduction in the estimated liabilities of earlier years and a net gain on the non-technical account.

Investment income

The net gain on the non-technical account (investment income) amounts to USD 12 million in the six-months period to 20 August 2002.   We urge you to view the full report on www.gard.no. If you have any questions, please contact Senior Vice President Sven-Henrik Svensen.

Yours faithfully, GARD SERVICES AS As agent only for Assuranceforeningen Gard -gjensidig- Claes Isacson Chief Executive Officer