No. 6/2005 - Rule changes 2006

Circular No. 6/2005 January 2006

TO THE MEMBERS OF ASSURANCEFORENINGEN GARD -gjensidig-

Dear Sirs,

RULE CHANGES 2006

Assuranceforeningen Gard (the “Association”)’s Rules for P&I and Defence cover for ships and other floating structures (the “Rules for Ships”) for the 2006 policy year, which commences at noon GMT on 20 February 2006, contain some alterations to those applying for the 2005 policy year, reflecting recent amendments in the Pooling Agreement being the legal framework for the International Group of P&I Clubs’ claims sharing and collective purchase of market reinsurance.

Rule 34 – Cargo liability

An amendment has been made in the Pooling Agreement, clarifying that an owner of a feeder vessel who has issued a non-negotiable bill of lading or way bill, may be covered when sued under another carrier’s negotiable bill of lading, even if no other part of the combined transport involves sea carriage. Against this background the following amendment has been made in the final line of Rule 34 (1) (i).

Rule 34 (1)(i) shall read as follows (amendment in bold):

“…….. notwithstanding that the Member may be liable under terms of a negotiable Bill of Lading issued by or on behalf of a party other than the Member providing for carriage in part upon the Ship and in part by another mode of transport.”

Rule 38 - Pollution

As a result of the decision of the International Oil Pollution Compensation Fund Assembly in October 2005 to terminate the mandate of the IOPC Fund Working Group with regard to the revision of the 1992 Civil Liability Convention (the “1992 CLC”) and the 1992 Fund Convention (the “1992 Fund”), the International Group of P&I Clubs agreed to extend the Small Tanker Oil Pollution Indemnification Agreement (the “STOPIA”) to all States having ratified and implemented the 1992 CLC and to put in place a mechanism to achieve an overall 50/50 sharing of the costs of persistent oil pollution from tankers.

The extension of STOPIA requires technically an addendum to or variation or replacement of the existing agreement. The wording of Rule 38 (3) is recommended amended accordingly.

For the purpose of achieving an overall 50/50 sharing of the costs of oil pollution from tankers, the International Group of P&I Clubs has approved, in principle, the so-called Tanker Oil Pollution Indemnification Agreement (the “TOPIA”) pursuant to which the ship owners through their P&I Clubs will contribute to the costs of oil pollution from tankers to be compensated under the Supplementary Fund Protocol (the “Third Tier”) providing for compensation in excess of the 1992 Fund. The owners’ liability to contribute to the costs of oil spills from tankers compensated by the Third Tier will be covered by the P&I Clubs. See Rule 38 (1) (b) in the Rules for Ships.

The TOPIA is expected to enter into force during the 2006 policy year, as a result of which all tankers will have a potentially increased exposure. In order to reduce the administration and to ensure that all tankers entered in the Association participate in TOPIA, the new Rule 38 (4) provides that the owners of a vessel being eligible for entry in TOPIA automatically will be treated as being a party to the agreement unless otherwise agreed.

Rule 38 (3) and the new Rule 38 (4) shall read as follows (amendments in bold):

“3. A Member insured in respect of a Ship which is a ‘relevant ship’ as defined in the Small Tanker Oil Pollution Indemnification Agreement, including any addendum to, or variation or replacement of such agreement (‘STOPIA’) shall, unless the Association otherwise agrees in writing, be a party to the STOPIA for the period of entry of the Ship in the Association. Unless the Association has agreed in writing or unless the Association in its discretion otherwise determines, there shall be no cover under this Rule 38 in respect of such a Ship so long as the Member is not a party to STOPIA.

4. A Member insured in respect of a Ship which is eligible for entry in the Tanker Oil Pollution Indemnification Agreement (“TOPIA”) shall, unless the Association otherwise agrees in writing, be a party to TOPIA for the period of entry of that Ship in the Association. Unless the Association has agreed in writing or unless the Association in its discretion otherwise determines, there shall be no cover under this Rule 38 in respect of such a Ship so long as the Member is not a party to TOPIA.”

Rule 52 - Limitations for Charterers and Consortium vessels

An agreement has been reached within the Pool that the cover available for Owners’ arising out of a contract of carriage of cargo on a so-called consortium vessel shall be restricted to the limit of cover available for charterers under a Charterer’s Entry. A consortium vessel means in this context a vessel operated by an operator being a partyto an agreement with the Member (the consortium agreement) for reciprocal sharing of cargo space on, inter alia, the Ship and the consortium vessel.

Rule 52 shall read as follows (amendment in bold):

Rule 52 - Limitations for charterers and consortium vessels

The Association’s liability under a P&I entry for any and all claims arising under Charterer’s Entries or in respect of the insurance of charterers under Owner’s Entries or in respect of the Member’s liability arising out of the carriage of cargo on a consortium vessel shall be limited to such sum or sums and subject to such terms and conditions as are set out in Appendix II

The new section 5 in Appendix II to the rules for Ships shall read as follows:

5. Consortium vessels

The cover afforded a Member in respect of cargo carried on a consortium vessel shall be limited to each incident or occurrence each entry to USD 350 million. For the purpose of this section 5 to Appendix II to the Rules for Ships, a consortium vessel means a vessel operated by an operator being a party to an agreement with the Member (the consortium agreement) for reciprocal sharing of cargo space on, inter alia, the Ship and the consortium vessel, provided always that the Ship is employed pursuant to the consortium agreement at the time the event giving rise to the claim against the Association occurred.

Rule 60 – Drilling, production and accommodation vessels - barges and heavy lift vessels

The exclusion for drilling and production vessels in the Pooling Agreement has been clarified. Vessels engaged in the storage of oil shall be deemed to be carrying out production operations.

Rule 60 (1) shall read as follows (amendment in bold):

“1. For drilling vessels, barges and any other vessels or barges employed to carry out drilling or production operations in connection with oil or gas exploration or production, including accommodation units moored or positioned on site as an integral part of any such operations, the Association shall not cover under a P&I entry any liabilities, losses, costs or expenses arising out of or during drilling or production operations. For the purpose of this Rule 60 (1) a Ship shall be deemed to be carrying out production operations if, inter alia, it is a storage tanker or other vessel engaged in the storage of oil, and either the oil is transferred directly from a producing well to the storage tanker or the storage tanker has oil and gas separation equipment on board and gas is being separated from oil whilst on board the storage tanker other than by natural venting.”

**Rule 73 - Nuclear perils** In order to harmonize the practice under the Pooling Agreement with regard to nuclear perils, the following amendment has been made as a new section c in Rule 73 (amendment in bold);

Rule 73 shall read as follows (amendment in bold):

“The Association shall not cover any liabilities, losses, costs or expenses directly or indirectly caused by or contributed by or arising from:a….b….c the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter,other than………”.

If you have any questions, please contact Kjetil Eivindstad, Senior Vice President, in Gard AS.

Yours faithfully, GARD AS as agent only for Assuranceforeningen Gard –gjensidig-

Claes Isacson Chief Executive Officer