2 November 2012 TO ALL MEMBERS Dear Sirs Class 5 (P&I) and Class 8 (FD&D) Open Policy Years 2013/2014 Policy Year - Calls The Committee has recently reviewed the position in respect of open Policy Years as well as Call requirements for the forthcoming 2013/2014 Policy Year and reached the following decisions: Class 5 (P&I) 2009/2010: The year shall be closed without further Call. 2010/2011: The three instalments of the Annual Call have been debited. No further Call is anticipated. The year will be considered for closure by the Committee in October 2013, in the usual way. The Release Call rate remains 15% of the Annual Call. 2011/2012: The three instalments of the Annual Call have been debited. No further Call is anticipated. The Release Call rate remains 15% of the Annual Call. 2012/2013: Two of the three instalments of the Annual Call have been debited. The final instalment will come due on 30 November 2012, as previously advised. The Release Call rate remains 15% of the Annual Call. The Committee also reached a decision in respect of Call requirements for the forthcoming 2013/2014 Policy Year and did so against the background of the following indications of development in the current year as well as the more general conditions and trends prevailing within the industry: With regard to the Association’s retained claims, there are encouraging signs in the attritional layer (up to US$100,000), where they are running at a lower level than in recent years. This is not, however, an indication of claims moderation generally, since increased deductibles will be playing a part. Claims in the band US$100,000-US$1m are developing in line with expectations. Claims in the highest band (in excess of US$1.0m), are running at a moderate level, although this band is volatile and has been very expensive in other recent policy years. Members will appreciate the uncertainties connected with, in particular, high severity, random claims and that there is scope for the picture to change significantly before the year end. The other component of the Association’s claims costs involves the Pooling system. Even by the standards of recent years, over the course of which there has been a marked increase in the cost of claims on the International Group Pool, the current picture is extremely unfavourable, both in terms of claims frequency and average claims severity. Regrettably it cannot be assumed that the recent more moderate retained claims experience signals any lessening of the longer term upward trend in P&I liabilities, highlighted by the substantially worsening experience up to 2011 and by reports from amongst the wider industry more recently, of which the deteriorating Pool statistics would seem to be an indication. - 2 In regard to investments (where fixed income holdings remain the dominant asset class in the Association’s portfolio), the year to date return stood at 4.05% at 20 August. A cautious approach to planning for the part to be played by investment contributions continues to be required in the current uncertain and low growth environment. The Association has a robust balance sheet and financial strength. The Committee is determined to safeguard that strength by moving towards more balanced underwriting performance; whilst recognising the depressed market conditions being encountered by Members in many shipping sectors. Against this backdrop, as well as the developments referred to above, the Committee has authorised a general increase in Annual