TO THE MEMBERS

Dear Sirs

2007 POLICY YEARReinsurance Arrangements

The most significant change in the Group's reinsurance arrangements is the decision by the Group to buy overspill reinsurance protection on behalf of each club for all categories of claim up to $1,000 million in excess of the limit of the Group's reinsurance ($2,050 million). This cover, which has been purchased following the decision by the Group clubs to introduce a limit on cover for claims in respect of passengers and seamen, will be available to all Group clubs to reduce the exposure of their members to an overspill claim. The cost of the new collective overspill protection has been included in the reinsurance rates which are charged to the different ship categories by all clubs in the International Group. The background to the limit on Club cover for passengers and seamen and the approach taken by the Group managers to the allocation of the cost of this new element of the programme are set out in a separate Club Circular Ref 5/07.

Pooling arrangements for 2007

For the 2007 policy year, the Club retention will be increased to $7 million from $6 million. The structure of the Pool is otherwise unchanged and will be in two layers for 2007: $7 million - $30 million (the lower Pool) and $30 million - $50 million (the upper Pool). The upper Pool will be pre-funded as it was for the 2006 policy year. Premium allocated to this layer will be paid into Hydra, the Group's segregated account captive which continues to reinsure the clubs' liabilities in respect of the upper Pool layer and the Group's 25 per cent co-insurance of the first layer of the general excess loss contract of $500 million excess of $50 million.

Overspill Arrangements

For the 2006 policy year, the UK Club purchased overspill reinsurance cover limited to its anticipated proportion of a $1,000 million overspill claim. Following the decision by the Group to buy collective reinsurance protection of such an overspill claim, the Board of the Club decided not to buy any additional overspill protection for the forthcoming policy year.

Oil pollution limit

The Board has determined in accordance with Rule 5B(ii) that for the 2007 policy year, the limit of the Club's liability for claims in respect of oil pollution shall be: $1,000 million each accident or occurrence in respect of each ship entered by or on behalf of an owner not being a charterer other than a demise or bareboat charterer, or a combined single limit of $350 million (for oil pollution and other risks) each accident or occurrence in respect of each ship entered separately by or on behalf of a charterer (other than a demise or bareboat charterer), or by more than one such charterer as joint owners.

War Risks P&I

Details of the Club's special War Risks P&I cover for the 2007 policy year are set out in the Club's Circular Ref 3/07.

Oil Pollution Risks in the United States - Tanker Voyage Additional Premium

Details of the additional premiums for 2007 are set out in the Club's Circular Ref 4/07.

Yours faithfully

THOMAS MILLER (BERMUDA) LTD.

CONTACT

• Members requiring further information should contact their usual Club contact