Special Offshore Circular

Special Offshore Circular No.1/2003 March 2003

To Members of Assuranceforeningen Gard - gjensidig-

with the following covers: P&I Cover of Mobile Offshore Units. Comprehensive General Liability Insurance for Mobile Offshore Unit Operators. Comprehensive General Third Party Legal and Contractual Liability Cover for Offshore Vessels and Operations.

Dear Sirs,

War Risks Cover and US Terrorism Risk Insurance Act (TRIA) compliance This Circular comments on the terms and conditions for cover of war risks under the following insurances :

P&I Cover of Mobile Offshore Units. Comprehensive General Liability Insurance for Mobile Offshore Unit Operators. Comprehensive General Third Party Legal and Contractual Liability Cover for Offshore Vessels and Operations.

Notice of Cancellation - Automatic Termination of Cover

The insurance cover for war risks described below is subject to the Institute Notice of Cancellation, Automatic Termination of Cover and War and Nuclear Exclusion Clause Hulls etc. Clause No.359 dated 1 January 1995. A copy of that clause is appended to this Circular. The Notice of Cancellation Clause means in practice that the special war risks P&I cover can be terminated upon the Association giving 7 - seven - days notice of its intention to do so. In certain circumstances the cover will even terminate automatically.

P&I Cover of Mobile Offshore Units

As set out in Appendix II to the Rules for Mobile Offshore Units, the Association has arranged a special war risks P&I cover for the 2003 policy year for the benefit of the Members having entered Mobile Offshore Units (MOUs) for P&I risks. The terms and conditions of the special war risks P&I cover are similar to those in force for the previous policy year, save that the maximum limit of cover has been increased to the lesser of the policy limit for P&I risks (excluding war risks) and USD 150 million any one event.   The special war risks P&I cover afforded is subject to the Association's Statutes and the Rules for MOUs for the 2003 policy year (save that the war risks exclusion in Rule 41 in the Rules for MOUs will not apply). The special war risk P&I insurance will cover P&I risks set out in chapter 6 of the Rules for MOUs caused by war risks as defined in Rule 41 of the Rules for MOUs, including liability or loss in excess of the amounts recoverable under the Vessel's Hull and Machinery and/or Crew/ Mariners War Risk insurances and any P&I inclusion clauses applicable thereto, but subject always to any special terms of entry agreed between the Association and the individual Member and set out in the relevant vessel's Certificate of Entry.   It is a condition for this insurance that the Member has arranged marine war risk insurance for the Vessel. This cover excludes any P&I liability or loss which is recoverable under the marine war risks insurance or which is covered under any other insurance the Member may have.   The cover for P&I war risks is subject to a deductible equal to the deductible agreed in the Vessel's terms of entry for standard P&I risks or USD 25,000, whichever is the higher, per event.   The special war risks P&I cover is placed as a reinsurance of the Association.   Comprehensive General Liability Insurance for st1:placeMobile Offshore Unit Operators. (MOU CGL Cover)   This additional insurance to P&I Cover of Mobile Offshore Units incorporates, by reference to Rule 41 of the Rules for P&I Cover of MOUs (and to Rule 58 of the Rules for P&I Cover of Ships in respect cover for Charterers' Liability), the war risks exclusions in the P&I Cover for MOUs (and for Ships in respect of Charterers' Liability).   The Association has arranged additional insurance for liabilities, losses costs and expenses caused by war risks and which would have been covered under the MOU CGL Cover but for the war risks exclusions incorporated therein. This additional war risk insurance is on terms identical to those of the additional war risks P&I Cover for MOUs described above, save that the limit of cover and deductible set out in the Cover Notes for MOU CGL Cover shall apply.

Conditional Areas - MOU P&I and CGL War Risks   The additional war risks insurances described above may from time to time exclude certain geographical areas, or cover in certain parts of the world may be subject to special conditions and/or additional premium.   Effective 20 February 2003 the following areas are held covered for war risks P&I and CGL Cover for MOUs on terms and/or additional premium to be agreed :

Members with MOUs within any of the above areas, or in waters adjacent to these areas, must contact the Association in order to reinstate the special war risks P&I cover. Any request(s) for reinstatement should include the name(s) of the unit(s) involved, location, number of crew and other persons on board, information about Hull & Machinery War and other war risks insurances with underlying P&I / liabilities included, including sums insured, and information about war risks indemnities from charterers or others.   Members, who have recently provided such information, need not contact the Association unless there are changes to their previous advice.   The conditional areas and the terms for war risks cover in such areas may be altered on seven days notice to Members.

Comprehensive General Third Party Legal and Contractual Liability Cover for Offshore Vessels and Operations. (CGL and Offshore Cover)

This additional insurance to the P&I Cover for Ships is not subject to exclusion of war risks. Liabilities, losses, costs and expenses, which are covered pursuant to the Cover Note for CGL and Offshore Cover, would also be covered if caused by war risks. The limit of cover and deductible set out in the Cover Note would apply also in respect of war risks.

US Terrorism Risk Insurance Act of 2002 (TRIA) compliance

The war risks cover includes claims arising from acts of terrorism as defined in the US Terrorism Risk Insurance Act of 2002 (TRIA). In order to ensure that the Association will be entitled to benefit from the program under which the United States federal government will pay 90 percent of terrorism losses exceeding a statutorily established deductible to be paid by the insurer providing coverage, a special Notice of Terrorism Insurance Coverage, as set out below, is included in this letter in order to comply with the policyholder disclosure requirements in TRIA.

Notice of Terrorism Insurance Coverage, US Terrorism Risk Insurance Act of 2002, section 103 (b)

Coverage for acts of terrorism is included in your policy for the 2003 policy year commencing at noon GMT on 20 February 2003. You should know that, effective from 26 November 2002, any losses caused by certified acts of terrorism will be partially reimbursed by the st1:country-regionst1:placeUnited States under a formula established by federal law. Under this formula, the st1:country-regionst1:placeUnited States pays 90 percent of covered terrorism losses exceeding the statutorily established deductible paid by the insurance company providing the coverage. The proportion of your annual premium that is attributable to coverage for acts of terrorism is USD 250,- per vessel per annum and pro rata for P&I Cover of MOUs and 0.5 percent of the premium for other covers.   Members with any questions are invited to contact the P&I Insurance Department of Gard Services AS.   Yours faithfully, GARD SERVICES AS As agent only for Assuranceforeningen Gard -gjensidig-   Claes Isacson Chief Executive Officer