TO THE MEMBERS

Dear Sirs

REVIEW OF OPEN POLICY YEARS
2003 POLICY YEAR GENERAL INCREASE

At the meeting held on 21st October the Board reviewed the development of the Association's funds and claims.

Open Policy Years

The claims continue to develop within previous projections: however, having fallen in the 1999 and 2000 policy years, the level of claims from 2001 onwards does appear to be increasing. At the same time volatility in the investment markets has continued to reduce the Association's funds.

It is the Board's clear strategy to protect Members against the possibility of supplementary premiums, achieving this through a combination of strong reserves and the Association's unique reinsurance contract with the Swiss Re. As a result of this strategy, there are no supplementary premiums estimated for any of the open policy years (2000, 2001 and 2002).

2003 Policy Year General Increase

Looking ahead, however, the Board is determined to plan to maintain the strong financial position of the Association without using the Swiss Re reinsurance to subsidise future premium levels. The downward move in premiums during the past decade has been reversed, notably by the increase imposed at the 2002 renewal. However, more needs to be done while investment returns remain unreliable.

The Board has therefore ordered a general increase in Members' premium ratings of 25 per cent for 2003, plus any relevant increase in the cost of the International Group's reinsurance programme for 2003. (At this stage the cost and structure of the reinsurance programme is unclear).

As is customary, after application of the general increase, Members' premium ratings will be reviewed in the light of individual loss record and other relevant factors, and a further increase or reduction will be applied as appropriate.

Mutual premiums for 2003 will be payable in four equal instalments, three during the policy year by 20th March, 1st June and 1st September, and the fourth by 1st December in the following year (2004). The estimate of supplementary premium is nil.

In conclusion the Board is conscious that premium increases are unwelcome. However the Directors consider it is in the best interests of the Association and its Members to take the steps necessary to maintain the Association's financial strength.

Yours faithfully

Thomas Miller (Bermuda) Ltd.