This is the second circular letter in respect of 2006/2007 policy year including updated information. It replaces circular P&I 2444/2005 dated December 12th 2005.

As previously advised the Board of Directors decided, at its meeting on December 6th 2005 upon its policy with regard to premium for the policy year February 20th 2006 to February 20th 2007.

The Board of Directors
noted	that the open policy years have developed according to predictions but that claims over years continue to increase in costs. The current policy year is showing a balanced development through its first eleven months.
decided	that calls have to be levied to reflect the Association’s exposure. A general increase of 10% shall be levied and the Association shall aim to maintain a 0% supplementary call for 2006/2007 and preceding open years. The release call for 2006/2007 policy year is set to 25%.
instructed	the management to contact each Member individually to discuss renewals for 2006/2007. After levying the mandatory general increase, the new call shall include reinsurance cost and any change thereof as well as the exposure for claims pooled in excess of the Association’s retention. The call shall furthermore reflect the exposure of the Association’s retention as well as an assessment of the Member’s records and risk exposure.

Owner’s Protection & Indemnity

Premiums

All premiums are debited as advance and supplementary calls. It is anticipated that this policy year will be closed in the year 2009. The Board decided that the premium shall be debited in four instalments: at inception on February 20th, May 20th, August 20th and November 20th. For 2006/2007 the premium will be based on Gross Tons (GT) as per the International Convention on Tonnage Measurements of Ships 1969.

Supplementary Call

The supplementary call for this year will initially be decided upon in 2007. The current estimated supplementary call for 2006/2007 is 0 %.

Release Call

The release call for 2006/2007 is at present set at 25%. Members should be aware that even if a release call has been paid, the Association retains the right to make overspill calls as per the P&I Rules (Rule 23).

Renewals

The premium for 2006/2007 will be based on the Member’s record for the five year period 2000-2004, including current year if adverse. Records and claims summaries are now available through the Swedish Club extranet, SCOL. The information is updated overnight.

Payment of Premium

Premiums are to be paid in accordance with the enclosed “Procedures for Payment of Premium”.

Limit of Liability

The overall liability of the Association for 2006/2007 is, unless otherwise stated in the Policy or in the P&I Rules, limited to a maximum collection of 2.5 % contribution of each entered vessel based on the International Convention on Limitation of Liability for Maritime Claims 1976, property claims Article 6 paragraph 1(b), in excess of reinsurance jointly placed by the International Group. (See also current P&I Rules, “Appendix”.) The limit of liability for Oil Pollution is USD 1,000,000,000. In respect of P&I Excess War Risk Cover the limit is USD 500,000,000 and in respect of war liabilities arising from Bio-Chem etc, the limit is USD 30,000,000.

Lay-up Returns

Members are allowed up to 50 % premium returns for vessels laid up in a safe port for more than thirty (30) consecutive days if the vessel has only watchmen and no cargo onboard. The Association, however, will always retain a minimum premium of USD 0.90 per GT.

Return premium is not granted for vessels less than 500 GT, nor for tugs, barges or passenger ships/ferries in coastal trade.

Claim for lay-up returns should be made to the Association as soon as possible, however, latest 12 months after expiry of the policy year. Sufficient information has to be supplied in order for the Association to calculate the return. A lay-up return application form is enclosed.

Reinsurance

The Association is participating in the International Group of P&I Clubs’ general reinsurance arrangement in excess of USD 50,000,000 and a Group Captive tier “Hydra” of USD 20,000,000 in excess of USD 30,000,000, the net cost for these covers are distributed as follows:

	Tankers carrying persistent oil as cargo:	USD 0.6799 per GT
	Tankers carrying non-persistent oil as cargo:	USD 0.3201 per GT
	Passenger vessels:	USD 0.8006 per GT
	Other dry cargo vessels:	USD 0.2851 per GT

The Association has elected to cover part of the retention of USD 6,000,000 to protect Members’ exposure.

The reinsurance structure for 2006/2007 is thus:

	Association’s retention	USD 6,000,000 (partly covered)
	Pool	USD 24,000,000 excess USD 6,000,000
	Group Captive	USD 20,000,000 excess USD 30,000,000
	Group Excess Loss	USD 2 billion excess USD 50,000,000

Oil Pollution/United States Oil Pollution Surcharge for Tankers

The oil pollution cover provided by the Association for the Policy year 2006/2007 is as follows:

Limit of Liability	USD 1,000,000,000
Declarations	Members have to declare voyages by tankers each quarter in arrears specifying voyages to the United States and the EEZ. The declarations are to be completed by July 20th, October 20th 2006, January 20th and April 20th 2007 and returned to the Association as specified below. Tankers (including OOs and OBOs) carrying persistent oil any voyage will be regarded as carrying persistent oil for any such quarter. Members are advised to inform the Association immediately if a vessel, declared to the Association as not carrying persistent oil as cargo, is carrying a cargo of persistent oil. Members with OOs and OBOs declared as dry cargo vessels are advised to inform the Association immediately if vessels are carrying oil as cargo whether persistent or non-persistent.
Persistent Oil	All hydro-carbon mineral oils other than the non-persistent oils.
Non-persistent Oil	Oil which consists of hydro-carbon fractions: at least 50 % of which, by volume, distils at a temperature of 340°C, and at least 95 % of which distils at a temperature of 370°C when tested by the ASTM method D 86/87 or any revision thereof.
Trading to the United States	Tankers carrying persistent oil as cargo and calling ports or places within the United States and United States Exclusive Economic Zone (EEZ) as defined by OPA 1990 for loading or discharging are subject to additional premium. The United States/U.S. EEZ includes the District of Columbia, Puerto Rico, Guam, American Samoa, U.S. Virgin Islands and Northern Marianas.
U.S. Voyage	A U.S. voyage is any cargo voyage involving loading or discharging at any port or place in United States/U.S. EEZ as defined above. One cargo voyage involving loading or discharging at more than one U.S. port or place within U.S./U.S. EEZ shall be regarded as a single voyage. Discharging one cargo at a U.S./U.S. EEZ port or place and loading a new cargo at a U.S./U.S. EEZ port or place constitutes two voyages.
Member’s Responsibility	The Member is responsible to report to the Association if any cargo of persistent oil has been loaded, discharged or transhipped in the United States or within the U.S. EEZ. The Member is also responsible to determine whether or not a cargo is persistent. The Association retains its right to ultimately decide whether a cargo is to be considered as persistent.

Additional Premium U.S.

In respect of tankers carrying persistent oil in bulk as cargo, following additional premiums will apply 2006/2007:

1.	per voyage: USD 0.119/GT (SBT: USD 0.105/GT) 50 % less if lightering in designated areas or calling at Louisiana Offshore Oil Port (0.060/0.052). minimum GT: 1,000 for calculation purposes. max voyages: no tanker will have to pay for more than 20 voyages.
2.	small tankers: Tankers of 1,000 GT or less may opt to pay per voyage as (1) above or a fixed annual premium of USD 2,389 (SBT: USD 2,108).
3.	parcel tankers: A parcel tanker is a tanker which is constructed or adopted primarily to carry cargoes of noxious liquid substances in bulk and which is capable of carrying at least ten grades of cargoes simultaneously, having been issued with an international certificate of fitness for the carriage of dangerous chemicals in bulk. parcel tankers carrying 5,000 MT or less of persistent oil on any voyage may opt to pay an annual premium of USD 7,140 (SBT: USD 6,300) or pay per voyage as (1) above. The voyage additional premium will be calculated on 3,000 GT equalling USD 357 (SBT: USD 315). parcel tankers carrying between 5,001 and 10,000 MT of persistent oil will pay per voyage USD 899 (SBT: USD 787). parcel tankers carry 10,001 MT or more of persistent oil, the voyage additional premium as (1) above will be used (USD/GT 0.119/0.105).
4.	SBT-tankers: Tankers equipped with segregated ballast tanks in accordance with the requirements of Regulation 13 of Annex 1 to MARPOL 73/78 will get a 10 per cent differentiation on above additional premiums. Thus, a call to the United States as per (1) above will be USD 0.105/GT, an annual premium as per (2) will be USD 2,108 and (3a) above will be USD 6,300.

Summary

					Non SBT		SBT
			USD and voy	USD and voy
	1		0.119 / GT	0.105 / GT
		Tankers > 1,000 GT	0.060 / GT	0.052 / GT
		LOOP / Lightering
	2	Tankers 1,000 GT or less	120	105
		(or per annum	2,389 p.a.	2,108 p.a.)
	3a	Parcel tankers 5,000 MT of cargo	357	315
	3b	Parcel tankers 5,001 – 10,000 MT of cargo	899	787
	3c	Parcel tankers 10,001 MT of cargo or more	0.119 / GT	0.105 / GT
		LOOP / Lightering	0.060 / GT	0.052 / GT

Enhanced survey and reporting requirements

Following a more intense focus on sub standard shipping, more rigid rules have been adopted for collection of information and surveys on ships entered or entering the Association.

2006 Renewals: Current Members with tankers – ten (10) years or more – built 1996 or earlier.
The Member shall information the Association if the vessel has carried HFO as cargo during 2005. In the affirmative the vessel will be subject to a condition survey, unless:

1. a condition survey has been carried out during last twelve (12) months;
   
2. a Special Survey has been carried out during the last six (6) months;
   
3. the vessel has achieved CAP 1 or CAP 2 status

Each vessel carrying HFO as cargo shall be surveyed every three (3) years thereafter.

DEFINITION HFO: By Heavy Fuel Oil is meant a residual fuel with a kinematic viscosity of 380 centipoise when measured at 50 degrees Celsius by test method ISO 3104.

All vessels entering the Club for P&I cover – twelve (12) years or more – built 1994 or earlier.
All vessels with an age of twelve (12) years or more will be subject to a condition survey to enter the Club for P&I.

The Club may require, at its own discretion, a condition survey for any ship entering the Club even if the ship is less than twelve years of age.

Certificates

The Association will assist Members to obtain required certificates. It should however be noted that the Association’s undertakings are always limited to the Civil Liability Convention 1992 (CLC). Please contact us for information and for forms of application.

War Clause

All Swedish flagged vessels are subject to the “The Swedish Club Outbreak of War Clause (P&I)”, (P.9), as enclosed.

U.S. Terrorist Insurance Act of 2002 (as extended)

Reference is made to letter and circular P&I 2413/2002 dated November 22nd 2002 and the cover described under the heading “P&I – War Risks” (applying to US flag ships under the Marad programme only).

Policy Endorsement

All policies and certificates of entry issued by the Association will include the following endorsement:

This certificate policy is evidence only of the contract of indemnity insurance between the above named Member(s) and the Association and shall not be construed as evidence of any undertaking, financial or otherwise, on the part of the Association to any other party.

If a Member tenders this certificate as evidence of insurance under any applicable law relating to financial responsibility, or otherwise shows or offers it to any other party as evidence of insurance, such use of this certificate by the Member is not to be taken as any indication that the Association thereby consents to act as guarantor or to be sued directly in any jurisdiction whatsoever. The Association does not so consent.

Certificate of Financial Responsibility (COFR) – U.S. Trading

Members are reminded that trading to the United States requires a COFR in advance. The Association does not issue such certificates. A COFR may be obtained through specialised institutes issuing such certificates. The Association will provide necessary documents to such approved institutes as may be required for obtaining a COFR.

P&I Rule changes and additions valid from February 20th 2006

Rule 2, last paragraph – reference to General Swedish Marine Insurance Plan
Amended to: General Swedish Marine Insurance Plan (2006)

Other Rule changes will be published in a separate circular letter from the Association, and will include following:

Pollution:
As a result of the decision to abandon the plans for a review of the CLC and Fund conventions, the International Group P&I Clubs have agreed to introduce “TOPIA” (Tanker Oil Pollution Indemnification Agreement) in addition to “STOPIA”. This will require changes in Rule 33.

Consortium vessels:
Cover for liability in respect of cargo carried on a so called consortium vessel (operated by an operator who is a party to an agreement with the Member for reciprocal sharing of cargo space on the entered ship and the consortium vessel) shall be restricted to the limit of cover offered by the Club for charterers’ P&I.

Drilling production and accommodation vessels. Barges and heavy lift vessels:
There will be a clarification in respect of the exclusion for drilling and production vessels. Vessels engaged in the storage of oils shall be deemed to be carrying out production operations and as such be excluded from cover.

Nuclear perils:
The following will be added to the list of exclusions in respect of nuclear risks in Rule 11 section 7:

(d) the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter.

War risks: An exception from the exclusion for liability caused by act of terrorism will be introduced. The exception will apply in instances when the Club has issued certain guarantees or undertakings specifically stated in the Rule.

Old Years

The current position on the old years is as follows:

Year	Status	Estimated Additional Call	Release Call
2002/2003 and earlier	Closed	–	–
2003/2004	Open	0 %	25 %
2004/2005	Open	0 %	25 %
2005/2006	Open	0 %	25 %
2006/2007	Open	0 %	est 25 %

P&I – Excess War Risks Cover

U.S. Terrorism Risk Insurance Act of 2002 (“TRIA”), Special War Risk P&I Cover for Owner’s and Charterer’s under the Group cover.

All Members entered for P&I, or Charterers’ entries under the Group Cover, are automatically covered for P&I War Risks, including acts of terrorism as defined in the U.S. Terrorism Risk Insurance Act of 2002 (“TRIA”). This cover, subject to the definitions in TRIA and acts of terrorism defined by TRIA, will be partly reimbursed by the United States under a formula established by federal law. Under this formula, the United States will pay 90 per cent of covered losses exceeding a statutorily established deductible to be paid by the insurer providing coverage. The proportion of the premium attributable to coverage for certified acts of terrorism as defined in TRIA is identified under “Premium” below. The War Risk cover is subject to the following conditions:

Reinsurance:	This contract is a reinsurance of the Association.
Conditions:	This policy is to pay claims for P&I risks as defined in the Rules of the Swedish Club, for which cover is excluded from vessel’s entry by reason of the War Exclusion clause contained therein, Rule 11 section 5, but including the following clauses: Notice of Cancellation, Automatic Termination of Cover and War and Nuclear Exclusion Clause – Hulls, etc. (W.1.2.P) Chemical, Bio-Chemical, Electromagnetic Weapons and Computer Virus Exclusion Clause. Clause No. 2249 (GPI) Cover may be terminated by the Association giving seven days notice. Excluding any liabilities, cost and expenses which the Member may incur under TOPIA 2006.
Trading:	Worldwide but liberty to cancel giving seven days notice.
Deductible:	USD 50,000 any one accident each vessel.
Limit:	Special Limit for Owners Where the Member and another party or other parties interested in the operation of the ship are insured under more than one owner’s and/or charterer’s entry with the Association or with the Association and any other association(s) which participates in the Pooling Agreement and the General Excess Loss Reinsurance Contract, the aggregate of claims brought against the Association and such other association(s) in respect of losses, liabilities, costs and expenses covered under this special war risk P&I cover for owners and/or charterers, shall be limited to USD 500 million any one incident or occurrence each vessel. If such claims exceed this limit, the liability of the Association in respect of each certificate of entry shall be limited to that proportion of that limit that claims recoverable from the Association under that certificate of entry bear to the aggregate of the said claims recoverable from the Association and from such other association(s), if any. Special limit for charterers As far as charterer’s entries reinsured under the Pooling Agreement and the Group’s Excess Loss Reinsurance Contract are concerned, the special war risks P&I cover functions as a primary cover. The limit is USD 500 million each incident or occurrence each vessel, provided always that where a ship is separately insured under more than one charterer’s and/or owner’s entry with the Association or with the Association and any other association(s) which participates in the Pooling Agreement and the General Excess Loss Reinsurance Contract, the aggregate of claims brought against the Association and such other association(s) in respect of losses, liabilities, costs and expenses covered under this special war risk P&I cover for charterers and/or owners, shall be limited to USD 500 million any one incident or occurrence each vessel. If such claims exceed this limit, the liability of the Association in respect of each certificate of entry shall be limited to that proportion of that limit that claims recoverable from the Association under that certificate of entry bear to the aggregate of the said claims recoverable from the Association and from such other association(s), if any.
Excess:	This policy to pay claims only in excess of amount recoverable under vessel’s Hull and Machinery and Crew Marine or War Risks policies, and any P&I inclusion clauses attached thereto and any other War Risk Cover arranged by the Member. Such a War Risk Policy shall cover the vessel’s proper value for hull and include a separate cover for liability up to the same amount or maximum USD 100,000,000.
Premium:	The premium is included in the reinsurance rates quoted including USD 0.0025 per GT for coverage of acts of terrorism as per the terms of TRIA.

The following clause is deemed incorporated in the P&I – EXCESS WAR RISKS COVER:

CHEMICAL, BIOLOGICAL, BIO-CHEMICAL, ELECTROMAGNETIC WEAPONS AND COMPUTER VIRUS EXCLUSION CLAUSE
(Clause No. 2249 (GPI))
This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith

1. In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from
   
   1.1 any chemical, biological, bio-chemical or electromagnetic weapon.
   
   1.2 the use or operation, as a means for inflicting harm, of any computer virus.

P&I Bio-Chem Cover

Subject to the terms and conditions and exclusions set out herein, cover is extended to include the liability of the Member:

	(a)	to pay damages, compensation or expenses in consequence of the personal injury to or illness or death of any seaman (including diversion expenses, repatriation and substitute expense and shipwreck unemployment indemnity),
	(b)	for the legal costs and expenses incurred solely for the purpose of avoiding or minimising any liability or risk insured by an Association (other than under the Omnibus Rule)

where such liability would be recoverable under either

	(a)	cover provided by the Club for such liabilities, costs, losses and expenses as would be covered under the Rules but for the exclusion of war risks in Rule 11:5, or
	(b)	any other policy of insurance providing equivalent cover,

save only for the operation of an exclusion of liabilities, costs, losses and expenses directly or indirectly caused by or contributed to by or arising from

	(a)	any chemical, biological, biochemical or electromagnetic weapon
	(b)	the use or operation, as a means for inflicting harm, of any computer, computer system, computer software programme, malicious code, computer virus or process or any other electronic system,

other than liabilities, costs, losses and expenses arising from

	(i)	explosives or the methods of the detonation or attachment thereof
	(ii)	the use of the entered ship or its cargo as a means for inflicting harm, unless such cargo is a chemical or bio-chemical weapon
	(iii)	the use of any computer, computer system or computer software programme or any other electronic system in the launch and/or guidance system and/or firing mechanism of any weapon or missile.

Excluded Areas

At any time or times before, or at the commencement of, or during the Policy Year, the Club may by notice to the Member change, vary, extend, add to or otherwise alter the ports, places, countries, zones and periods specified in Clause 2.1 from a date and time specified by the Club not being less than 24 hours from midnight on the day the notice is given to the Member.

Cancellation

Cover hereunder may by notice to the Member be cancelled by the Club from a date and time specified by the Club, not being less than 24 hours from midnight on the day notice of cancellation is given to the Member.

Limit of Liability

Subject to Clause 4.2 the limit of the liability of the Club under this extension of cover in respect of all claims shall be in the aggregate USD 30 million each ship any one accident or occurrence or series thereof arising from any one event. In the event that there is more than one entry by any person for Bio-Chem cover as provided herein in respect of the same ship with the Club and/or any other insurer which participates in the Pooling Agreement or General Excess Loss Reinsurance Contract, the aggregate recovery in respect of all liabilities, costs, losses and expenses arising under such entries shall not exceed the amount stipulated in Clause 4.1 and the liability of the Club under each such entry shall be limited to such proportion of that amount as the claims arising under that entry bear to the aggregate of all such claims recoverable from the Club and any such other insurer.

Deductible

The deductible shall be USD 50,000.

Law and Practice

This clause is subject to English law and practice.

Charterers’ Limited Liability Cover

For 2006/2007 the Association also offers a limited cover for Charterers including Charterers Liability to Hull. The overall limit is limited but may be arranged up to USD 300,000,000 any claim or occurrence. For further details, please contact each Team respectively.

Additional Covers

P&I – Deviation cover

The Association has a general cover for deviation in favour of the Members.

Cover:	The cover includes those deviations not covered by the ordinary P&I Rules, such as ordered deviations by the Shipowner. Such deviations shall be reported to the Association and the Association will determine the additional premium depending on the circumstances. The cover may be extended to include Ad Valorem Cargo and Specie and other Valuable Cargo. It may, furthermore, include Feeder/Lightering, Transshipment/Storage, Drydocking with cargo on board. In respect of War, cover in excluded areas subject to agreement.
Information:	When advising the Association, amount and value of cargo under B/Ls exposed must be included.
Limit:	Value of cargo exposed, however, not exceeding USD 50,000,000 any one accident each vessel.
Declarations:	All voyages shall be declared stipulating the type of cargo and the value of the cargo exposed.

The following additional covers are arranged by the Association for 2006/2007. Members requiring these covers shall contact the relevant Team.

AD VALOREM – Declared cargo value in Bill of Lading Additional Cover for Oil Pollution Bunkers Charterers’ Liability to Hull Deviation Insurance Insurance of Deck Cargo shipped against under-deck B/L Shipowners’ Liability to Cargo at Warehouses and/or Wharves Time-Charterers’ Liability Excess Protection & Indemnity Risks Tour Operators Liability Cover

In this circular we have dealt with our general terms. As always, we are prepared to tailor make the insurance cover to suit the special needs of any Member.

Yours sincerely,The Swedish ClubFrans Malmros