No. 8/2008: Review of policy years, premium rating for the 2009 policy year, half year status report as at 20 August 2008

Circular No. 8/2008 October 2008

To the Members of Assuranceforeningen Gard - gjensidig

Dear Sirs,

Re: Review of policy years, premium rating for the 2009 policy year, half year status report as at 20 August 2008

Introduction

This document highlights the decisions taken at the recent meeting of the Boards of Directors of Assuranceforeningen Gard -gjensidig- (the “Association”).

Review of policy years

Closed years

Closed years up to and including the 2005 policy year have progressed as projected.

2005 policy year closed

A 20 per cent deferred call, 5 per cent less than forecast, was levied in September 2006. The Board has now decided to close the 2005 policy year without any further calls being levied.

Open policy years

The 2006 policy year

A 20 per cent deferred call, 5 per cent less than forecast, was levied in September 2007. The year is assumed to produce a surplus and is likely to be closed in October 2009 without further deferred calls and/or supplementary calls being levied.

The 2007 policy year

The budgeted 25 per cent deferred call was levied in September 2008. The year is expected to produce a surplus due to substantial investment income and is likely to be closed in October 2010 without any supplementary calls being levied.

The 2008 policy year

During the first six months of the year the Club has experienced an increase in the volume of reported liabilities and number of claims. The increase is  slightly higher than in the budget for the year even when adjusted for business volume growth.  Members should continue to budget with the full deferred call of 25 per cent being levied for the 2008 policy year.

Release Calls

The Board resolved that the Release Calls for open policy years be set as follows:

Premium policy for the 2009 policy year

As a general principle, the level of premium for both mutual and fixed premium entries will depend on the individual Member’s loss record. However, it has been decided that also for 2009 policy year, as for the current year, the premium policy for ordinary P&I business should be a technical result target expressed as a combined ratio net (“CRN”) rather than as a general premium increase across the board for all entries. The CRN expresses the estimated claims and administration costs for the year over estimated premiums earned.

Against this background the Board decided that premium adjustments resulting in a forecast CRN for Gard P&I, fixed premium business included, of 105 per cent for the 2009 policy year have to be made. This target approximates to a general premium increase of 15 per cent for mutual owners entries and 20 per cent for mutual FD&D (Defence) entries. The deferred call for all mutual entries was set at 25 per cent of the advance call.

There will also be a general increase of USD 2000 in all deductibles for P&I risks. In addition, separate adjustments will be made in each Member’s premium rating to reflect changes in the cost of the International Group’s reinsurance arrangements for the 2009 policy year. Further details about the International Group and the Association’s reinsurances for the 2009 policy year will be published later.

Half year status report as at 20 August 2008

Tonnage (P&I mutual)

Total tonnage entered on behalf of owners on a mutual basis as at 20 August 2008 amounted to 109.4 million GT. Comparable figures as at 20 February 2008 were 105.9 million GT.

Key figures from the consolidated accounts*

The total balance available to meet outstanding and unreported claims amounted to USD 1,939 million of which the general contingency reserve totaled USD 531 million. Comparable figures as at 20 February 2008 were USD 1,836 million and USD 580 million, respectively.

The technical account showed a deficit of USD 8 million resulting in a CRN of 102 per cent which is an improvement compared to last year and better than budget. The non-technical account shows a deficit of USD 41 million resulting in an overall deficit for the six months period to 20 August 2008 of USD 49 million. The negative investment result reflects the adverse financial markets.

* For this purpose the term “consolidated” means the combined consolidated accounts for Assuranceforeningen Gard – gjensidig, Gard P&I (Bermuda)Ltd and Gard Marine & Energy Limited. The Board of Directors of each of these three companies have permitted the combined consolidated accounts figures to be published.

If you have any questions, please contact Senior Vice President Rolf Thore Roppestad.

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

Claes Isacson Chief Executive Officer