Review of policy years (May 1998)

Circular No. 4/98 May 1998

TO THE MEMBERS

Dear Sirs,

REVIEW OF POLICY YEARS

At its meeting in New Orleans on 25 May 1998, your Committee reviewed the Association?s financial position in detail. A summary of its findings and its decisions are set out below.

The decisions taken have served to further reduce the cost of P&I insurance for the Club?s mutual Members, and have been permitted by the financial strength and strong investment performance of the Association. The decision not to levy the budgeted supplementary call represents a saving to the mutual Membership in the 1997 policy year (in the region of 53 million GT) of 23.08 per cent of their estimated total cost (some USD 33 million). This comes in addition to similar savings last year on the 1996 policy year and lower than budgeted calls since 1992. The Association?s free reserves continue to grow providing further security and stability for the Membership and will be reported on in detail in the Management Report due for issue in July.

CLOSED YEARS

The closing of the 1994 policy year in October 1997 has contributed to an increased contingency reserve.

OPEN YEARS

The 1995 policy year

A supplementary call of 15 per cent was levied in July 1996, 15 per cent below the initial forecast. The policy year is showing a surplus and is expected to be closed in October 1998 without further supplementary call. The release call for the 1995 policy year was set at nil.

The 1996 policy year

No supplementary call has been levied for the 1996 policy year, against the initial forecast of 30 per cent. Even if the policy year currently is showing a deficit, it is nevertheless developing better than forecast. The year is scheduled to close in October 1999 and, in the light of the overall strong reserve position of the Club, should do so without supplementary call. The release call for the 1996 policy year was set at five per cent.

The value of reported claims have decreased compared with the 1996 policy year at twelve months from inception. Although it is too early to derive any clear picture from the claims development, there is no reason to expect an eventual claims outcome worse than average. In deciding what supplementary call to be levied your Committee also took into account that the Association?s overall contingency reserve meets the laid down strategic target even if no supplementary call were to be ordered. Against this background your Committee decided that no supplementary call should be levied for the 1997 policy year. The release call for the year was set at ten per cent.

The 1998 policy year

The Committee decided that the release call for the year should be 55 per cent, which is 25 per cent above the forecast supplementary call of 30 per cent.

SUMMARY

To summarise, the following decisions were taken:

Yours faithfully, ASSURANCEFORENINGEN GARD -gjensidig-

John G. Bernander Managing Director