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Rule 12 Estimated Total Calls and Owners' General Discount

1 Before the commencement of each Policy Year, the Association shall decide whether and to what extent the Members renewing their entries in the Association shall be granted an Owners’ General Discount in the Estimated Total Calls of all Ships entered for that Policy Year.  

Notification of the Owners’ General Discount in the Estimated Total Calls to be granted Members renewing their entries in the Association shall, if practicable, be given to Members one calendar months before the commencement of the Policy Year to which the Estimated Total Calls relates.

3 A Ship entered in the course of the Policy Year shall pay a daily pro rata proportion of the stipulated Estimated Total Call adjusted for the Owners’ General Discount if the Member is entitled to such discount pursuant to Rule 12.1.

 

Guidance

The provisions of Rule 12 do not apply to fixed premium entries.1

(A) …the Association shall decide whether and to what extent Members renewing their entries...shall be granted an Owners' General Discount… (Rule 12.1)

The Estimated Total Call that is to be paid by a mutual Member for any given Policy Year has historically been split into two components. The first part consisted of the proportion of the Estimated Total Call that was collected during the Policy Year to which it applied. This part of the Estimated Total Call was collected in three instalments in order to assist the Member’s cash flow.

The second part, called the Last Instalment, consisted of the proportion of the Estimated Total Call for the Policy Year that was deferred for payment in later years on a date to be specified by the Association. The Last Instalment constituted an integral part of the Estimated Total Call for an entry for the particular Policy Year. It was only the time of payment of that proportion of the total estimated premium that was deferred in order to enable the Association to gain a better view of the overall financial result for the Policy Year before the Last Instalment was levied on the Member.

However, the Association’s strong financial results over many years has resulted in it normally being able to reduce its initial assessment of the Estimated Total Call and it is considered that the historical system providing for the deferral of the Last Instalment suffered from the handicap that the Member would not know what its true financial obligations would be and, more importantly, what savings it might expect until the full results were known at some point in future. Therefore, in order to simplify the system, allow greater financial clarity and enable Members that renew their entries to benefit more immediately from the Association’s good performance, the Estimated Total Call will henceforth be collected in full in three instalments during the Policy Year.2 Furthermore, if it is considered appropriate based on its assessment that its results are better than originally forecast, the Association is entitled prior to commencement of the succeeding Policy Year to grant those Members who renew Membership for the succeeding Policy Year an Owners’ General Discount this being a proportion of whatever Estimated Total Call that might otherwise be calculated to be the technically correct premium level for the Member for the succeeding Policy Year. The Owners’ General Discount will represent a saving of insurance costs for mutual Members and can be accounted for in the year to which the premium relates.

As defined under Rule 1, the Owners’ General Discount is a general premium rebate for a Policy Year that is to be granted to all mutual Members, or in exceptional cases, a defined category or group of mutual Members,3  renewing their entries in respect of that Policy Year if the Association’s overall financial position so permits. Consequently, fixed premium entries and new entries from Members not having ship(s) entered in the Associations will not be entitled to the Owners' General Discount.

The Owners’ General Discount is a general premium rebate that will be determined by the Board of Directors prior to the commencement of the Policy Year. Ships entered during the relevant Policy Year by Members having already renewed their existing entries in the Association will benefit from an Owners’ General Discount pro rata according to the number of days entered that year.

 

(B) Notification of the Owners’ General Discount in the Estimated Total Calls to be granted Members renewing their entries in the … (Rule 12.2)

Members need to know well in advance what amount of premium will be levied for any Policy Year including any variation that may be applicable to them pursuant to Rule 11 in order to enable them to decide whether to continue to have their Ships entered in the Association, and/or to incorporate the expected premium cost into their own budgets. Therefore, Rule 12.2 provides that notification any Owners' General Discount to be granted to the Membership in respect of a Policy Year shall be given whenever practicable prior to 20 January before commencement of the relevant Policy Year. 

(C) …pro rata proportion of…stipulated Estimated Total Call … (Rule 12.3)
Ships which are entered after 20 February in any Policy Year shall pay that proportion of the Estimated Total Call, adjusted for the Owners' General Discount if the Member is entitled to such discount, for the whole of that Policy Year which the number of days of entry for such Ships bears to the total Policy Year. The reason for this is that each Ship constitutes a risk as from the time of entry and has to share proportionately in the risk of all other entered Ships. 

Where the entry of a Ship is terminated or ceases during the Policy Year, the Member remains liable for the Estimated Total Call, as adjusted for the Owners' General Discount on a pro-rata basis pursuant to the provisions in Rule 26. The proportionate liability of such Ships to pay such premiums and calls relates to all claims incurred by the Association during the Policy Year, regardless of whether the events giving rise to some or all of such claims occurred before or after the entry of the Ships.4

 

 

1 See the Guidance to Rule 10.2.
2 Rule 20.1.
3 See Rule 14.
4 See the Guidance to Rule 26.