At the meeting of the Association's Board of Directors on 2 December 2003 alteration to the Rule 35.1(2) was approved with effect from the 20 February 2004, for details of which please refer to our circular No.03-012 of 2 December 2003. This Rule change reflects the International Group's decision to specify the availability of the club cover against liabilities assumed by the Group Clubs under CLC certificates or FMC guarantees to the extent such are not covered by other insurances, in particular War Risks insurances.

The above Rule change includes the terms of the CLC Owners' Liability (Act of Terrorism, etc.) Clause of the Association's Rules. We, therefore, have decided to abolish the said Special Clause at the end of the 2003 policy year. With regard to the background to the introduction of the Special Clause please refer to our circular No.01-014 of 5 February 2002.

We would like to explain about reduction of the scope of our coverage for tankers which are not subject to CLC certificate by reason of not carrying more than 2,000 tons of oil in bulk as cargo after the abolishment of the CLC Owners' Liability (Act of Terrorism, etc.) Clause.

Should a Member be liable for oil pollution arising from the incident caused by terrorism act under the CLC Convention, as for ocean-going entries, the Member's liabilities are recoverable from his underlying war risks underwriter up to the proper value of the entered vessel and the Excess War P&I Cover provided by the Association through the International Group's reinsurance arrangement will respond to claims in excess of the vessel's proper value. As for Japanese coastal entries, such Member's liabilities are unrecoverable from any insurer. Taking into consideration of the following facts, we expect that the relevant Members will understand the situation.

1. The Members for Japanese coastal entries generally do not arrange the war risks insurance.
2. It seems to make very little sense that the Association will provide the cover only for terrorism risks, because the relevant Members do not feel the necessity for war risks insurance.
3. With respect to such coverage up to the proper value of the entered vessel we should treat the Members equally regardless of type of entry.