Circular No Circular No. 12/97


9 February 1998



TO THE MEMBERS



Dear Sirs,

OIL POLLUTION FACILITY - 1998 POLICY YEAR
USD 200 MILLION EXCESS OF USD 500 MILLION
USD 250 MILLION EXCESS OF USD 500 MILLION, CALIFORNIA REQUIREMENTS

We refer to our Circular of 5 February 1997 with respect to excess oil pollution cover of USD 200 million for the current insurance year. We have been advised that facilities offered by London market underwriters are also available for the 1998 insurance year for a USD 200 million tranche of protection in excess of the limit for oil pollution cover provided by the Association. The limit of cover provided by the Association for the 1998 policy year will remain at USD 500 million.

The Association, acting as intermediary only, is prepared to also assist Members wishing to take out the above excess cover for the 1998 year. This facility is not a club cover, but a direct insurance between market insurers and Members. The Club has not been involved in the placing of the cover and has therefore had no involvement in the renewal terms offered. However, for the first time, the cover has been placed at the instruction of a negotiating committee set up by the International Chamber of Shipping.

The attention of Members is drawn to certain aspects by comparison with the structure for the 1997 policy year:

A. The basic rates have been reduced by approximately 43%. The voyage rate and basis (4) rate have been reduced by about 17%.
B. OBOs declared as Basis (1) -dry or Tankers declared as basis (2) -clean. If at any time during any quarter the ship trades with dirty products, then the full dirty tanker (basis 3) rate applies for that quarter only, and the vessel will become liable for USA voyage AP?s.
C. Parcel tankers carrying between 5,001 and 10,000 mt of persistent oil as cargo will be charged with the voyage AP on 7,500 GT.
D. With regard to the Certificate of Financial Responsibility of USD 750 million required by the Californian Authorities, an extra USD 50 million is available on payment of an additional premium.

12 Months at Noon GMT 20 February 1998
EXCESS OIL POLLUTION LIABILITY USD 200,000,000 excess USD 500,000,000
Conditions/rates are as follows (all rates gross):
1. Dry cargo vessels, gas carriers (not carrying oil as cargo) and passenger vessels.USD 0.028 per GT per annum for world-wide trading, minimum 3,000 GT.
2. Clean tankers (defined as carrying other than persistent oil as cargo). USD 0.055 per GT per annum for world-wide trading, minimum 3,000 GT.
3. Dirty tankers (defined as carrying persistent oil as cargo), other than 4) below: Basic premium per GT per annum excluding cargo voyages to the USA as underlying Club entry, minimum 3,000 GT.
  Year Built Rate
  1994 - 98 USD 0.081 per GT
  1989 - 93 USD 0.086 per GT
  1984 - 88 USD 0.098 per GT
  1979 - 83 USD 0.111 per GT
  1974 - 78 USD 0.131 per GT
  1973 & earlier USD 0.152 per GT
  Vessels are deemed to have been built in the year in which they are shown as completed in Lloyd?s Register of Shipping.
  PLUS Voyages to the USA at an additional premium of USD 0.100 per GT per voyage, minimum 3,000 GT.
    All features of the underlying Club premium calculation apply to this additional voyage premium, including the 20 voyage maximum and 50 percent tonnage for LOOP and transhipment.
4. Dirty tankers under 3,000 GT continuously trading in the USA will pay a flat premium of USD 7,642.00 in full.
  Adjustments in premium may be made as follows:
  I Regardless of short periods, all declarations will be charged at the full annual rate, except for the following:
    a) Vessels for which the underlying Certificate of Entry is cancelled or endorsed to cancel, may be deleted from cover at pro rata return premium.
    b) Vessels for which a new underlying Certificate of Entry is issued or a current Certificate of Entry is endorsed to add, may be added from date request for cover is made to the Association, at pro rata premium from date of attachment with the Association.
  II OBOs declared as basis (1) -dry or Tankers declared as basis (2) -clean. If at any time during any quarter the ship trades with dirty products, then the full dirty tanker (basis 3) rate applies for that quarter only, and the vessel will become liable for USA voyage AP?s. The applicable quarters are 20/02 - 20/05, 20/05 - 20/08, 20/08 - 20/11 and 20/11 - 20/02.
  III No cover is available under this facility for charterers other than bareboat charterers and charterers named as co-assured on the underlying Owners? entry. Cover is always subject to the limits any one vessel arising out of any one event.
  IV All premium developed under 1), 2), 3) basic premium and 4) above is payable at inception. Voyage additional premiums under 3) are payable quarterly.
  V No laid-up returns.
  VI It is further noted and agreed that the O.P.A. Non-Certification Clause reads as follows: Notwithstanding any other provision of this policy or of any underlying insurance, this policy of insurance is not evidence of financial responsibility under the Oil Pollution Act of 1990 or any similar federal or state laws. Any showing or offering of this policy by the Assured as evidence of insurance shall not be taken as any indication that the Underwriters consent to act as guarantor or to be sued directly in any jurisdiction whatsoever. The Underwriters do not consent to be guarantors or to be sued directly.
  VII In respect of the US voyage surcharge for parcel tankers to follow the underlying club entry and charge as follows:
    a) parcel tankers carrying 5,000mt or less of persistent oil as cargo:- USD 0.100 per GT per voyage calculated on 3,000 GT
    b) parcel tankers carrying 5,001mt - 10,000mt of persistent oil as cargo:- USD 0.100 per GT per voyage calculated on 7,500 GT
    c) parcel tankers carrying 10,001mt and over of persistent oil as cargo:- USD 0.100 per GT per voyage calculated on actual GT of the vessel
    Information: A parcel tanker is defined as a ship constructed or adapted primarily to carry cargoes of noxious liquid substances in bulk, and capable of carrying at least 10 grades simultaneously, having been issued with an international certificate of fitness for the carriage of dangerous chemicals in bulk.
  VIII Above premiums are gross rates and will be subject to a discount. The discount has not yet been finally determined, but will be 10% or possibly more.
  IX It is agreed to allow a 12.5 percent discount from the above rates in respect of tankers equipped with segregated ballast tanks in accordance with the requirements of Regulation 13 of Annex 1 to MARPOL 73/78.

The standard radioactive exclusion clause has been amended and M.M. Clause No. 1083 (c) will be included with each cover note. The clause mirrors the exclusion in the International Group Pooling Agreement.

California COFR requirements, USD 250 million excess of USD 500 million
With regard to the coverage of USD 750 million required by the Californian Authorities, the extra coverage of USD 50 million can be effected by endorsing the existing USD 200 million cover upon special request by the Members. The following conditions will apply:
It is hereby understood and agreed to increase the limit of liability for tankers by USD 50 million to USD 250 million arising out of any one event whilst in Californian waters only.
Subject to a further additional premium of:
  1) USD 0.025 per GT per voyage in respect of dirty tankers.
  2) USD 0.005 per GT per voyage in respect of clean tankers.
  3) Dirty tankers under 3,000 GT continuously trading in Californian waters will pay a flat additional premium of USD 1,900.00 in full.

All other terms and conditions and features of the underlying premium calculations to apply. All other terms and conditions remain unaltered.

Cover will not attach unless the Association, acting as an intermediary, has received clear written instructions to effect cover prior to 20 February 1998.

Attached is a declaration form which Members who wish to effect the excess oil pollution cover should complete and return to the Association prior to 20 February 1998.

If you have further inquiries, please contact the Underwriting Department.

Yours faithfully,
ASSURANCEFORENINGEN GARD
-gjensidig-

John G. Bernander
Managing Director


DECLARATION FORM

EXCESS OIL POLLUTION COVER
USD 200 MILL. EXCESS OF USD 500 MILL.
USD 250 MILL. EXCESS OF USD 500 MILL., Californian requirements
20 FEBRUARY 1998 - 20 FEBRUARY 1999

Kindly effect on our behalf excess oil pollution cover for 12 months effective 20 February 1998.

Vessel: _____________________________________GT: ____________

Year built (shown as completed in Lloyd's Register of Shipping): ___________

Vessel to be covered in accordance with definitions, premiums and terms set out in Circular No. 12/97 of February 1998.
r Dry cargo (including gas carriers not carrying oil as cargo and passenger vessels)
r Clean tanker
r Dirty tanker (additional premium for call to USA)
r Dirty tanker under 3,000 GT continuously trading in the USA
r Vessel (tankers only) requires a coverage of USD 250 mill. excess of USD 500 mill. for Californian waters

Specification of tankers:
r Parcel tanker.
r SBT tanker, in accordance with the requirements of Regulation 13 of Annex 1 to MARPOL 73/78 (MARPOL Tanker).

This form, or summary for a fleet, should be returned not later than 20 February 1998.

Please note that the Association is acting as an intermediary only.

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Signed by Member (if not signed by Member must be signed by authorised signatory of Member) in which case please state name of signatory.