TO THE MEMBERS11/96 of November 1996, a new COFR facility - The Shipowners Insurance and Guaranty Company Ltd. ("SIGCo") - is now available to provide guaranties for shipowners requiring COFRs from 28 December 1996.

Dear Sirs

US OIL POLLUTION - CERTIFICATION UNDER OPA 90

As anticipated in the Association's circular no

SIGCo

SIGCo is a limited liability company, incorporated in Bermuda with the sole objective of providing COFR guaranties to the United States Coast Guard (USCG) on behalf of shipowners as required under OPA 90 and CERCLA. SIGCo is licensed as a Class 3 company under the Bermuda Insurance Act, has paid-up capital of USD 25 million and is approved by the USCG to issue COFR guaranties.

A key feature of SIGCo's structure is that the ordinary shares of SIGCo have been set up in a trust for the benefit of its shipowner clients, who will therefore have an interest in the net worth of the company and any profits generated by the premiums they pay.

The capital has been provided through preference shares held by Stockton Re, ACE Limited, Global Capital Re and a number of other interests. These shares are redeemable and will be phased out over time, leaving ownership of SIGCo solely in the hands of the Trust. This arrangement will ultimately also give control of SIGCo to the Trust. The trustee is a private trustee company whose board of directors will be made up of representatives of shipowner clients of SIGCo.

SIGCo will provide COFR guaranties on a fixed premium basis. The object of the structure, including the trust arrangement, is to allow SIGCo's shipowner clients to benefit from any profits the company may make without financial exposure of their own balance sheets.

The Chairman of the Board of Directors of SIGCo is Miles Kulukundis, former Chairman of the UK P&I Club and of INTERTANKO.

SIGCo is unaffiliated to any broker and will have its own independent management team, all of whom have experience in the administration of Stockton Re's First Line Program.

The Guaranty

SIGCo will provide COFR guaranties up to USD 400 million for shipowners who are members of the International Group of P&I Clubs with effect from 28 December 1996. However, applications for COFRs to take effect from that date can be made in advance. The guaranties provided by SIGCo are based on a difference in conditions insurance contract with the shipowner. A comprehensive reinsurance programme is in place to protect SIGCo against exposures of USD 399 million excess of a retention of USD 1 million per vessel per incident.

There will be no published tariffs. Premiums will be fixed by individual agreement. It is expected that these rates will be lower than rates charged by COFR facilities this year.

A shipowner requiring a COFR guaranty commencing or renewable on or after 28 December 1996 may contact SIGCo through his brokers at:

PO Box HM 3398
Hamilton HM PX
BERMUDA

Tel: +1 441 298 0600
Fax: +1 441 298 0610

SIGCo is temporarily located at 55 Par-la-Ville Road in Hamilton but will be relocating to new premises in early 1997.

Terms and Conditions

The terms and conditions of SIGCo's contract are similar to those contained in the First Line COFR Facility Agreement. The main difference relates to the indemnity clause. Under the First Line contract the shipowner must reimburse to First Line all claims paid by First Line together with costs and any other liabilities.

SIGCo's terms and conditions require similar warranties and undertakings from the owner as are currently given to First Line, but provided the owner is not in breach of these conditions, SIGCo will absorb any claims paid by SIGCo which are not recoverable from the Club and SIGCo will also not seek indemnification for the first USD 50,000 of costs paid by SIGCo.

The application process is simpler than that used by First Line and can be completed substantially by an authorised broker except for the power of attorney which will be required from the applicant. SIGCo will require Members to obtain three letters from the Club, all of which are in terms which the Association can provide. Members, or their brokers, needing these letters should apply to the Underwriting Department of Thomas Miller P&I Ltd., attention John Joslin on fax number +44 171 204 2089.

First Line

Stockton Re will continue its First Line Program on behalf of shipowners requiring COFR guaranties commencing or renewed with an effective date between now and 27 December 1996. It will not accept applications for COFRs after this date.

Shoreline

It is reported that Shoreline will be offering improvements in its terms for renewal and details of any significant changes will be advised.

GENERAL CONSIDERATIONS

The Board continues to maintain the policy that the Association should not supply evidence of financial responsibility and thus become a "guarantor" under OPA 90.

The Board has nevertheless been encouraging the Managers to facilitate an improved COFR scheme in the light of the considerations originally set out in the Association's circular of 18 October 1994. The Board has accordingly welcomed the efforts of Thomas Miller & Co Ltd. and those managements of other Clubs who have worked together with Stockton Reinsurance Limited in the development of SIGCo.

It must, however, be emphasised that it is for each Member and his broker, where relevant, to assess this scheme and any other means of obtaining COFRs and to select the means most suited to his needs. Notwithstanding the assistance given in the creation of SIGCo by Thomas Miller & Co Ltd., the Association continues its policy of not making recommendations as to a Member's choice of scheme, and the Managers will continue to offer to Members such assistance as has traditionally been given, irrespective of t he Member's choice of COFR guarantor.

Yours faithfully