Circular 12/95: Limit On Cover


Dear Sirs


At its meeting on 23rd October the Board of Directors considered again the position of the Association in relation to its aim of imposing a limit on cover.

The Board re-affirmed the view formed in 1992, following the review of the strategy, that it was no longer acceptable for the Association to expose its Members to unlimited liability for catastrophe calls and that it should move to a limit on cover. The Board further reviewed the progress towards this aim which had been made in discussions with other Associations in the International Group, bearing in mind the importance to the Members of maintaining the pooling and reinsurance arrangements with those Associations. The Board noted that it had only proved possible to persuade a majority of those other Associations to agree to put a limit on Members' exposure if that limit was set at a level higher than that originally envisaged by the Board.

The terms of the "20 per cent" compromise proposal were described in the Chairman's letter to Members dated 19th June. The Board remains of the view that this proposal represents the best way to achieve acceptance of the principle of a limit on cover without endangering the pooling and reinsurance arrangements, subject to its being accepted by at least 10 Group pooling Associations representing at least 85 per cent of the Group's tonnage.

The Board is conscious that the resultant exposure at this level is giving rise to serious concerns for many Members and in the light of these concerns has not felt it appropriate to vote on any resolution which would in future prevent it or the Managers from responding to those concerns.

The necessary Rule changes will be put to the membership at a special general meeting when the opportunity will also be taken of inviting the Members to indicate whether or not they support the Board's long term aim of imposing a limit on cover at a realistically collectable level. The meeting is scheduled to be held in Brussels on 13th December, 1995, and full details will be circulated to Members in due time.

Yours faithfully


Staff Author