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Rule 15 Release Calls

When an entry is terminated or shall cease, the Association may, without awaiting the fixing of Deferred Calls and Supplementary Calls, determine an additional premium for each open Policy Year based on, but not limited to, the anticipated rate(s) of Deferred Calls and Supplementary Calls for each year. Upon payment of such Release Calls, the Member shall be released from all liabilities for further Deferred Calls and Supplementary Calls in respect of the said entry and shall under no circumstances be entitled to participate in the distribution of any surplus decided upon thereafter.  

Guidance

(A) When an entry is terminated or shall cease...an additional premium… (Rule 15)
When a Member enters one or more Ships in the Association, he agrees implicitly to share the liabilities of the membership as a whole for the Policy Years in which he is insured, and accepts liability for the payment of any Deferred Calls or Supplementary Calls which the Association may consider necessary to balance the income and expenditure for those Policy Years. The Member’s obligation to pay such calls for any Policy Year which has not yet been closed1 continues even if his entries are terminated2 or cease3 for any other reason. In such circumstances, it can be inconvenient for the Association and wasteful of the Association’s funds to have to continue to pursue the Member for Deferred Calls or Supplementary Calls, and it may also be inconvenient for the Member to have a continuing and uncertain liability for such Calls. 

Were it not for the Release Calls provisions of Rule 15, the liability of a Member to pay Deferred Calls and Supplementary Calls for all open Policy Years4 in which he had been insured with the Association would continue without limitation as to time or amount until those Policy Years had been closed in accordance with Rule 16. However, pursuant to Rule 15, the Association is entitled to calculate a ‘once-and-for-all’ Release Call which, when paid, will release the Member from liability to pay any future Deferred Call or Supplementary Call.5 The Association is not obliged to agree to calculate a Release Call and could, should it so wish, insist on the payment by Members of Deferred Calls and Supplementary Calls as and when they are levied until that Policy Year is closed.6 However, once Members have been notified that a Release Call has been calculated, a Member is entitled to opt to pay such Release Call and thereby avoid exposure to future liability for Deferred Calls and Supplementary Calls. 

The Association may, in certain circumstances, agree to accept a guarantee or cash deposit from the Member instead of levying a Release Call. Should the Association agree to accept a guarantee, the guarantee must be issued by an independent financial institution acceptable to the Association and must cover the estimated Deferred Calls and Supplementary Calls for each open Policy Year in which the Member has been insured by the Association. A Member who provides a guarantee or cash deposit in lieu of paying a Release Call remains liable to pay future Deferred Calls and Supplementary Calls as and when they are levied. However, the Member is entitled in such circumstances to share in any repayment of premium pursuant to Rule 17. 

(B) …based on, but not limited to, the anticipated rate(s) of Deferred Calls and Supplementary Calls… (Rule 15)
In calculating the Release Call the Association will take into consideration all the open Policy Years during which the Ship has been entered and make an estimate of the likely future Deferred Calls and Supplementary Calls for those Policy Years. The Association will also take into account, on the one hand, the risk that the Policy Years may develop more adversely than expected and, on the other hand, the benefit to the Association of receiving earlier payment of the Release Call. 

The level of Release Calls is determined by the Board of Directors of the Association.7 Following the European Commission’s investigation into the claims’ sharing and reinsurance arrangements of the International Group of P&I Clubs, the Clubs that are members of the Group have agreed to publish an annual statement explaining the factors which they take into account when assessing the level of Release Calls and the risk of collecting such Calls. As a result of such discussions, the Association, in common with all other clubs that are members of the International Group of P&I Clubs, have determined that the Release Call, whilst still based on the anticipated Deferred Calls and Supplementary Calls, should be assessed as a percentage of the Estimated Total Call (ETC) for the relevant entry for the relevant Policy Year. 

When assessing the relevant percentage of the ETC the Directors will take into account the following factors:

  • The risk that the published levels of expected premiums may be exceeded assessed on the basis of the Association’s methodology for calculating the capital required, taking into account premium risk, reserve risk, market risk and other significant categories;
  • The wish to maintain a set structure for reducing the Release Call percentage per Policy Year under normal circumstances. 

(C) Upon payment…shall be released… (Rule 15)
The Member is released from liability to pay Deferred Calls and Supplementary Calls only when the Release Call has been paid. Therefore, if a Release Call has been debited but not paid, the Association remains entitled to levy Deferred Calls and Supplementary Calls pursuant to, respectively, Rules 12 and 13, and the Member remains bound to pay them. 

(D) …all liabilities for further Deferred Calls and Supplementary Calls… (Rule 15)
The release given to the Member is only in respect of future Deferred Calls and Supplementary Calls, not for any other Calls that have already been levied, but not paid, by the Member at the time that the entry was terminated or ceased. However, and importantly, payment of the Release Call does not release the Member from his obligation to pay Overspill Calls pursuant to Rule 18. 

(E) …under no circumstances be entitled to participate in…any surplus… (Rule 15)
Upon payment of a Release Call, the Member loses the right to share in any subsequent repayment of premium pursuant to Rule 17 relating to any Policy Year in which he had entered a Ship or Ships. This is a logical consequence, since by virtue of payment of a Release Call, the Member will be freed from any liability to pay future Deferred Calls or Supplementary Calls.


 

1 See the Guidance to Rule 16.
2 See the Guidance to Ruled 24.
3 See the Guidance to Rule 25.
4 The Deferred Calls and Supplementary Calls pertaining to the current Policy Year would be calculated by reference to a reduced Advance Call under the pro rating provisions of Rule 26, if the entry was terminated or ceased during the course of that year.
5 However, payment of Release Calls does not release the Member from his liability to pay Overspill Calls in relation to any Policy Year during which his Ships were entered in the Association. See (D) below.
6 See Rule 16.
7 See Articles 6.2.f of the Bye-Laws of Gard P. & I. (Bermuda) Ltd. and 9.2.e of the Statutes of Assuranceforeningen Gard -gjensidig-.