2006 - 2007 Policy Year

CIRCULATED TO ALL MEMBERS, BROKERS AND DIRECTORS

Rules

The proposed changes to the P&I Class Rules as set out in the Notice to Members dated 12 December 2005 and the Addendum thereto were approved at the Members’ EGM held on 17 January 2006 and will take effect from 20 February 2006.

These rules will be available on the Association’s website www.nepia.com from 20 February 2006.

International Group Reinsurance

The International Group’s Excess Loss Contract has been renewed with the same limits and excess points as for 2005, and with an overall increase in rates of just over 6%. The rates for 2006, inclusive of the excess war risks cover referred to below, will be as follows.

Dirty tankers US$ 0.680/gt
Clean tankers US$ 0.320/gt
Dry cargo ships US$ 0.285/gt
Passenger ships US$ 0.801/gt

As with the 2005 year, each Club will retain the first US$6 million of each loss and the International Group Pool will retain the balance up to US$50 million of each loss as well as a 25% coinsurance of the first US$500 million layer of the Excess Contract. This coinsured share and the top US$20 million layer of the Pool will be reinsured into an International Group captive, Hydra Insurance Co. Ltd.

Charterer’s Entries

The limits of cover for P&I risks applying to Charterer’s Entries will continue to be US$350 million any one event for all claims under the same entry.

Affiliated Charterers

In the infrequent situations where an Owner Member has an affiliated or associated company named on the Owner’s Entry as an affiliated or associated time or voyage charterer, the limit of cover for such a joint member will be the Limitation Amount plus US$50 million but not exceeding US$1,000 million any one event for pollution claims and US$300 million any one event for non-pollution claims.

P&I War Risks

The limit of cover on the excess P&I war risks cover provided by the Club will continue to be US$500 million any one event in excess of the ship’s value and with certain aggregate limits as at present. For those Members who have relevant ships as defined in the Tanker Oil Pollution Indemnification Agreement (TOPIA), this excess P&I war risks cover will exclude liability arising under TOPIA. This exclusion is to give Members the benefit of the exception of terrorism under TOPIA.

As this amendment arose after the 2006 Rules had gone to print, the corresponding change to Rule 24(2) will be dealt with as a term of entry in the certificate of entry.

Bio-chem Risks

In view of the exclusion of bio-chemical etc risks from the P&I war risks cover, the International Group Clubs will continue to provide limited cover for certain risks, liability to crew under Rule 19(1) and legal costs and expenses incurred solely for the purposes of avoiding or minimising claims from a bio-chemical event. Full details are as set out in the Association’s Circular of 1 March 2004 (www.nepia.com) but with the limit of cover amended from US$20 million to US$30 million.

U.S. Voyage Surcharges

Clubs whose Members are carrying persistent oil as cargo to or from ports within the United States or the United States Exclusive Economic Zone (“EEZ”) as defined in OPA 1990 will again have to pay an increased contribution towards the cost of the International Group Excess Loss Reinsurance Contract, but the rates of surcharge for such voyages will reduce by 5%.. This additional cost will be passed on to the Members concerned.

For the 2006/2007 policy year the surcharge for ships without segregated ballast tanks (as defined below) will amount to US$0.119 per gross ton (gt) per voyage; for ships with segregated ballast tanks the surcharge will be US$0.105 per gross ton per voyage; in each case there will be a maximum charge or “cap” of twenty voyages. The surcharge will apply to all tankers carrying out a US voyage, as defined below, and carrying persistent oils, also as defined below. Tankers of 1,000 gt or less will have the option of either making voyage declarations in the same way as tankers over 1,000 gt on a flat contributory tonnage of 1,000 gt, or of paying a single annual premium of US$2,389 (US$2,108 for ships with segregated ballast tanks).

The following special provisions will apply to parcel tankers for the 2006/2007 policy year:

1. Parcel tankers which never carry more than 5,000 metric tonnes (mt) of persistent oil on any voyage may either pay a single annual premium of US$7,140 (US$6,300 for ships with segregated ballast tanks) or may make voyage declarations at a rate of US$357 per voyage (US$315 for ships with segregated ballast tanks.

2. Parcel tankers which carry between 5,001 mt and 10,000 mt of persistent oil must make voyage declarations in which case the surcharge will be calculated at a rate of US$899 per voyage (US$787 for ships with segregated ballast tanks).

3. Parcel tankers which sometimes carry more than 10,000 mt of persistent oil must make voyage declarations, in which case the surcharge will be calculated on the full gt of the ship except on voyages where 10,000 mt or less of persistent oil are carried, when the surcharge will be calculated as above.

The amount of the surcharge will be halved in respect of cargoes exclusively discharged at LOOP (Louisiana Offshore Oil Port) or exclusively transferred to another ship at a place approved by the US Coast Guard and in the exclusive economic zone (“EEZ”) as defined in OPA 1990.

It will again be necessary to follow a procedure whereby the Club is regularly advised of US voyages in order that the surcharge may be applied. It is proposed, therefore, that unless prior arrangement is reached, the Club’s cover for all tankers will incorporate the following Exclusion Clause with effect from 20 February 2006.

“Excluding any and all claims in respect of oil pollution arising out of any incident to which the US Oil Pollution Act 1990 is applicable”.

The above Exclusion Clause will apply unless the Member agrees to undertake:

1. to make quarterly declarations in arrears, at the latest within 2 months of each quarter ending 20 May, 20 August, 20 November and 20 February as to whether the tanker has made any cargo voyages to or from ports within the United States or the United States Exclusive Economic Zone (“EEZ”) as defined in OPA 1990 and if so, the number of such voyages and the nature of cargo (persistent oil or other cargo) and the port or place of loading or discharging; and

2. to pay such additional premium in respect of such voyages as may be agreed between the Association and the Member. Members requesting removal of the Exclusion Clause will again have to provide declarations which will have to be returned to the Club within 2 months of the end of each quarter, failing which the terms of entry will be amended to exclude claims for oil pollution where OPA 1990 is applicable.

U.S. TRIA

The Directors have resolved that cover for acts of terrorism as defined in the US Terrorism Act 2002 will be included on the same terms with the same limit. The Act applies to very few ships entered in the Club but, for those that are eligible, a premium of US cents 0.25 per gt will be deemed attributable to these risks and will be included within the overall premium.

Extended Covers

The Association’s website, www.nepia.com, contains details of the additional covers available to Members for the 2006 policy year.

Outstanding Premiums

Members are reminded that all renewals are subject to there being no outstanding premiums owing to the club at 20 February 2006.

The Association’s underwriting department will be happy to deal with any questions arising on any of the above matters.

PA JENNINGS

DEPUTY MANAGING DIRECTOR

North Insurance Management Limited

As Managers on behalf of the North of England P&I Association Limited