War Risk P&I Cover 2001 - General Notice of Cancellation in respect of Owners' Entries reinsured under the International Group's Pooling Agreement (16 October 2001)

Circular No. 5/2001 16 October 2001

TO THE MEMBERS OF ASSURANCEFORENINGEN GARD -gjensidig- Dear Sirs,

War Risk P&I Cover 2001 - General Notice of Cancellation in respect of Owners' Entries reinsured under the International Group's Pooling Agreement

Since 1986 the International Group Clubs have arranged, individually, an additional market War Risk cover (the War Risk Cover) for the benefit of their Members who have effected owners entries (including bareboat or demise charterers' and operators' entries) in respect of standard P&I risks under the Association's Rules for P&I and Defence Cover for Ships and Other Floating Structures (the Rules). This insurance covers P&I risks excluded from the standard P&I cover solely by virtue of the provisions of Rule 58 of the Rules. We refer to Circular No. 10/2000 and to Appendix I, section 3, to the Rules for the 2001 policy year. The War Risk Cover is not intended as a substitute for Owners' primary war risk cover, whether arranged with their H&M insurer or in the market, but is intended to pay only those claims in excess of amounts recoverable under an Owner's underlying war risks policy including P&I risks. As far as charterers' entries reinsured under the International Group's Pooling Agreement are concerned, the War Risk Cover functions as a primary cover.   The War Risk Cover is subject to the Standard War Risks Conditions Clause relating to termination of cover. This includes the Institute Notice of Cancellation and War Automatic Termination of Cover Clauses, which means that the insurance can be terminated upon the giving of 7 (seven) days notice. However, the War Risk Cover may be reinstated subject to agreement between the individual Member and the Association as to rate of premium and/or conditions and warranties.   Since the tragic terrorist attacks in the United States on 11 September, the International Group Clubs have been reviewing the situation from day to day. In particular, Group Clubs are concerned that the War Risk Cover should, if possible, continue to protect Members as a whole and should not be unduly exposed either at the primary level or in any particular geographical area.

In the current circumstances, it has now been decided that general notice of cancellation should be issued. The Association therefore advises that this Circular constitutes Notice of Cancellation of the War Risk Cover in accordance with the Standard War Risks Conditions clause relating to termination of cover. This notice shall run from 2400 hours GMT on 17 October 2001. The cancellation will become effective at 2400 hours GMT on 24 October 2001.

Upon expiry of the notice at 2400 hours GMT on 24 October 2001, the War Risk Cover will be reinstated automatically without, for the time being, payment of any additional premium on the condition that the War Risk Cover upon reinstatement shall be limited to an excess of either the US dollar equivalent of proper value of the entered vessel in accordance with Rule 71.1 (a), or the amount recoverable from underlying war risks underwriters whichever is greater, irrespective of whether an underlying war risk P&I cover is in place. The proper value of the entered vessel shall be deemed to be no more than USD 100 million for the purpose of the underlying war risks cover. The limit on the War Risk Cover upon reinstatement shall remain USD 100 million per vessel per event, and a deductible of USD 50,000 per event shall apply.

This notice of cancellation applies only for vessels entered for P&I cover in the Association under owners entries and reinsured under the International Group's Pooling Agreement. This notice of cancellation does not apply to charterers entries reinsured under the International Group's Pooling Agreement. It also does not apply to covers where the Association as risk carrier has arranged its own reinsurance outside the International Group's pooling system, such as the Comprehensive Charterer's Cover, the P&I cover for Mobile Offshore Units and the additional insurances provided or facilitated by the Association, which are subject to their own war risk cancellation provisions.

Members are invited to direct any inquiries concerning the foregoing to the Insurance Department.

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

Claes Isacson Chief Executive Officer