We refer to our previous circular No.02-016 of 28 January 2003 on the US Terrorism Risk Insurance Act of 2002 ("TRIA"). 

At the meeting of the Association's Board on 17 February 2003 the Directors considered the P&I War Risks Cover could be made available to Members in accordance with the P&I War Risks Clause of the Association's Rules and the extent to which this can include cover arising from acts of terrorism as defined in the TRIA, aiming at the possible recovery to be prepared thereof. Following the receipt of US legal advice and reinsurance quotations, the Directors have resolved that special cover can be provided to Members for the 2003 policy year, including cover arising from acts of terrorism as defined in the TRIA under the P&I War Risks Clause. The terms of resolution of the Directors are attached hereto. The followings are main features of this cover for the 2003 policy year.

1. Subject to 2. below, the limit of this cover will be increased from US$200 million to US$400 million each ship, any one accident or occurrence.

2. As before, the cover will only respond to claims in excess of the US dollar equivalent of the proper value of the entered ship as referred to in Rule 35.2(2) or the amount recoverable from the ship's war risks underwriters, whichever is the greater. For the purpose of this cover, where the proper value exceeds US$100 million, the proper value will be deemed to be US$100 million.

3. A premium for cover arising from acts of terrorism as defined in the TRIA will be US cents 0.25 per G/T.

P&I WAR RISKS COVER
SPECIAL COVER UNDER P&I WAR RISKS CLAUSE
TERMS OF DIRECTORS' RESOLUTION OF 17 FEBRUARY 2003

WHEREAS, in accordance with Rule 35-1-(2) of the Association's Rules coverage for certain war and similar risks, including acts of terrorism, is excluded under the general mutual indemnity undertaking, special cover is nevertheless provided for these same certain risks under the P&I War Risks Clause and in accordance with each individual Member's terms of entry;

WHEREAS, on 26 November 2002 the United States' Terrorism Risk Insurance Act of 2002 (Public Law 107-267) ("the Act" or "TRIA") was signed into law by US President George W. Bush; and

WHEREAS, the Act provides for a three-year program of US Federal quota share indemnification to participating insurers for insured losses resulting from certain acts of terrorism occurring through year-end 2005; and

WHEREAS, entities meeting the definition of "insurer" in the Act are required to participate in the program; and

WHEREAS, it remains uncertain whether this Association comes within the definition of "insurer" until detailed regulations are promulgated in near future, but on the other hand it cannot be decided now that the Association does not fall in the defined "insurer."

WHEREAS, the Act requires "insurer" to make available in all of its "commercial property and casualty policies" coverage for "acts of terrorism" as defined, and

WHEREAS, the term "act of terrorism" is defined as an act certified by the US Treasury Secretary after a finding that the act: (1) was committed on behalf of any foreign (i.e., non-US) person or interest; (2) was a violent act dangerous to human life, property, or infrastructure that resulted in damage within the United States or to a US air carrier or US-flag vessel wherever located; (3) is part of an effort to coerce the civilian population of the US or to influence the policy or affect the conduct of the US Government by coercion; and (4) resulted in damages exceeding $5 million; and

WHEREAS, under the TRIA program the US Government will indemnify insurers for 90% of losses resulting from certified acts of terrorism in excess of an insurer deductible; and

WHEREAS, insurers are required to notify policy holders of the existence of the TRIA program and the premium to be charged for coverage for such acts of terrorism; and

WHEREAS, the Directors on behalf of the Association's membership have considered whether coverage of TRIA-defined acts of terrorism could be removed from the special cover and made subject to the general mutual indemnity undertaking; and

WHEREAS, the Directors have concluded that acts of terrorism, as the other perils subject to the special cover, remain unsuitable for a general mutual indemnity undertaking; and

WHEREAS, no Member responded affirmatively to the initial offer made by this Association to provide cover of TRIA-defined acts of terrorism on the basis of supplemental premium rates designed to fund the TRIA deductible and retention without mutual indemnity or the reinsurance available to the special cover; and

WHEREAS, the Directors have determined, based on new reinsurance arrangements of the International Group of P&I Clubs, that special cover under the P&I War Risks Clause can be provided at twice the limit provided in the 2002 Policy Year and that the estimated portion of the cost of that cover for TRIA - defined coverage is US$0.0025 per gross ton.

NOW THEREFORE BE IT RESOLVED, that in accordance with the P&I War Risks Clause of the Association's Rules, where a ship is insured under the insurance contract with no fixed sum insured or Special Cover for Charterer, special cover be provided to the Members of the Association for the year commencing at 21:00 JST on 20 February 2003 against risks, including TRIA-defined acts of terrorism, which are excluded from cover solely by virtue of the provisions of Rule 35-1-(2), at an increased limit. Unless otherwise agreed in writing, such cover shall be subject to all other terms and conditions of a Member's entry in the Association and shall be provided upon and subject to the following terms and conditions.