Review of policy years (May 2003)

Circular No. 1/2003 May 2003

TO THE MEMBERS OF ASSURANCEFORENINGEN GARD -gjensidig-

Dear Sirs

REVIEW OF POLICY YEARS

At its meeting in London on 26 May 2003, your Committee received reports on all matters of importance for the business activities of the Association and was pleased to note that the financial position of the Association had improved.

To summarise:

• the Committee decided to levy the forecast 25 percent deferred call for the 2002 policy year.

• as at 20 February 2003 the Association’s contingency reserves, which provide security and stability for the Membership, stood at USD 242 million (USD 195 million last year).

• no further supplementary calls are expected for the 2000 and 2001 policy years.

More detailed information will be provided in the Management Report to be issued in July.

When discussing the policy years below, the term “deferred call” is used, although, strictly, this terminology is not correct since the new term only applies to the 2003 policy year and onwards. The term “supplementary call” is now only used for a call exceeding the forecast for the year

CLOSED YEARS

Closed policy years are developing better than forecast previously.

OPEN YEARS The 2000 policy year

The forecast deferred call of 25 per cent was ordered for this year in May 2001. The claims development during the period from 24 to 36 months from the year’s inception has been favourable, but the year is still showing a deficit. Against the background of the Association’s strong financial position, the year is anticipated to be closed in October 2003 without a further supplementary call being levied.

The release call for the year was set at nil.

The 2001 policy year

The forecast deferred call of 25 percent was levied in May last year. During the period from 12 to 24 months from inception, claims have progressed favourably and the estimated technical deficit has been reduced. Due to the sound financial position of the Association no further supplementary call is anticipated. The year is expected to be closed in October 2004.

The release call for the year was set at 5 per cent.

The 2002 policy year

The total value of reported claims for the 2002 policy year is somewhat higher than for the preceding year, but below the level of the 2000 year twelve months from inception. Given the continuing increase in tonnage, the 2002 year is well within the budget. With a full deferred call, the year will yield a small surplus which will assist in restoring the Association’s contingency reserve to the strategically preferred level determined by the Committee. In the light of this the Committee decided to levy the full deferred call of 25 percent for payment on 5 September 2003.

The release call for the year was set at 50 percent (to be reduced to 25 percent once the deferred call of 25 percent has been paid).

The 2003 policy year

The Committee confirmed that the release call for the year should be set at 50 percent, which is 25 percent above the deferred call for the year.

SUMMARY

To summarise, the following decisions were taken:

1. The 2000 policy year: No further supplementary call will be made for this policy year.

2. The 2001 policy year: No further supplementary call is anticipated for this policy year.

3. The 2002 policy year: A deferred call of 25 per cent has been ordered for this policy year for payment on 5 September 2003.

4. Release calls:

   1. The 2000 policy year:

      1. Nil

   2. The 2001 policy year: 5 per cent

   3. The 2002 policy year:

      1. 50 per cent*

   4. The 2003 policy year:

      1. 50 per cent

*To be reduced to 25 per cent once the deferred call of 25 per cent has been paid.

If you have any questions, please contact the P&I underwriting department.

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

Claes Isacson Chief Executive Officer