TO THE MEMBERS

Dear Sirs,

OVERSPILL CALL PROTECTION

For the 1999 policy year, the Association is providing substantial additional protection for its Members against the possibility of meeting the overspill costs of a catastrophe claim.

Members will be aware that the International Group of P&I Clubs' reinsurance contract covers claims between US $30 million and approximately US $2.03 billion. Above that, any excess, or "overspill", would be pooled among the Group Clubs. Since the overall limit of cover is now about US $4.25 billion (the exact figure is calculated in accordance with the Association's Rule 22), the overspill element of the maximum possible claim would be about US $2.22 billion, shared between all the Group Clubs.

Although the chance of any overspill is extremely remote - indeed, there has never been such a claim on the P&I Clubs - the Directors have decided to increase substantially protection for Members against the potential cost of such an overspill.

This has been achieved by enhancing the protection from the U.K. Club's special Catastrophe Reserve (about US $260 million) by using income from the Reserve to purchase a further US $1 billion of reinsurance cover. Together, the Reserve and this special reinsurance will provide protection for the Association's 20 per cent share (approximately) of US $1.26 billion of overspill claims falling on the policy year.

Members requiring further clarification are invited to contact the Managers.

Yours faithfully

THOS R. MILLER & SON (BERMUDA)

,