PART VII: CALLS AND FINANCE

Every Member who has entered a vessel for insurance in the Association in respect of any policy year (not being a closed policy year) shall, unless otherwise agreed by the Managers in writing, provide, by way of calls to be levied from such Member in accordance with the provisions of Rules 50 and 51, all funds which in the opinion of the Board are required

1 To meet such of the general expenses of the Association as the Board may from time to time think fit to charge against the insurance business of the Association in respect of such policy year.

2 To meet the claims, expenses and outgoings (whether incurred, accrued or anticipated) of the insurance business of the Association in respect of such policy year (including without prejudice to the generality of the foregoing, any proportion of any claims, expenses or outgoings of any insurer other than the Association which has fallen or which may be thought likely to fall upon the Association by virtue of any reinsurance concluded between the Association and such other insurer).

3 For such transfers to the reserves or other accounts of the Association (as referred to in Rule 56) and for subsequent application for the purposes of such reserves or other accounts or otherwise as the Board may think expedient.

4 For such transfers as the Board may think proper to meet any deficiency which has occurred or may be thought likely to occur in any closed policy year or years.

5 For such sums as may be required by any government legislation or regulation to be set aside for the establishment or maintenance of an adequate solvency margin or guarantee fund in respect of any policy year.

RULE 50: ADVANCE CALLS

At such time or times during or after the end of each policy year as the Board shall approve, and subject to Rule 53 and to any special terms agreed with the Association, each Member shall pay to the Association the basic rate of contribution of each of his vessels insured during that policy year. The amount so payable shall constitute the advance call for that policy year in respect of that vessel.

RULE 51: ADDITIONAL CALLS

1 At any time or times during or after the end of a policy year, but not after such policy year has been closed, the Board may levy one or more additional calls for that policy year in respect of each vessel insured during that policy year, including any vessel or vessels in respect of which a Member has ceased to be insured in accordance with Rule 45. The Board may levy such a call either

A by deciding upon a percentage of the net advance call, or

B by deciding upon a percentage of the basic rate of contribution of all vessels insured during that policy year.

2 In relation to a vessel insured for any policy year a Member shall be bound to pay by way of additional call a sum ascertained, in the case of paragraph 1A by multiplying the percentage ordered by the Board by the net advance call paid or payable by him in respect of such policy year and, in the case of paragraph 1B by multiplying the percentage ordered by the Board by the basic rate of contribution of the insured vessel by the entered tonnage of the ship in the Association.

3 The Board or the Managers may at any time seek to enable Members to become aware of their financial commitment for the relevant policy year by indicating an estimate of the percentage at which it is hoped that any additional call or calls will be levied. If any such estimate shall be given to any Member it shall be without prejudice to the right of the Board to levy additional calls for the relevant policy year in accordance with these Rules at a greater or lesser percentage than so indicated and neither the Association, nor the Board, nor the Managers shall under any circumstances be under any liability in respect of any estimate so given or in respect of any error, omission or inaccuracy contained therein.

RULE 52: OVERSPILL CALLS, CLAIMS AND GUARANTEES

1 INTRODUCTORY

Any reference to a claim incurred by the Association or by any other party to the Pooling Agreement shall be deemed to include the costs and expenses associated therewith.

2 RECOVERABILITY OF OVERSPILL CLAIMS

A Without prejudice to any other applicable limit, any overspill claim incurred by the Association shall not be recoverable from the Association in excess of the aggregate of
a that part of the overspill claim which is eligible for pooling under the Pooling Agreement but which, under the terms of the Pooling Agreement, is to be borne by the Association, and
b the maximum amount that the Association is able to recover from the other parties to the Pooling Agreement as their contributions to the overspill claim.

B The aggregate amount referred to in Rule 52.2.A. shall be reduced to the extent that the Association can evidence
a that costs have been properly incurred by it in collecting or seeking to collect
i overspill calls levied to provide funds to pay that part of the overspill claim referred to in Rule 52.2.A.a, or
ii the amount referred to in Rule 52.2.A.b, or
b that it is unable to collect an amount equal to that part of the overspill claim referred to in Rule 52.2.A.a which it had intended to pay out of the levy of overspill calls because any overspill calls so levied, or parts thereof, are not economically recoverable, provided that if, due to a change in circumstances, such amounts subsequently become economically recoverable, the aggregate amount referred to in Rule 52.2.A shall be reinstated to that extent.

C In evidencing the matters referred to in Rule 52.2.B.b the Association shall be required to show that
a it has levied overspill calls in respect of the overspill claim referred to in
Rule 52.2.A on all Members entered in the Association on the overspill claim date
in accordance with and in the maximum amounts permitted under Rule 52.5, and
b it has levied those overspill calls in a timely manner, has not released or otherwise waived a Member's obligation to pay those calls and has taken all reasonable steps to recover those calls.

3 PAYMENT OF OVERSPILL CLAIMS

A The funds required to pay any overspill claim incurred by the Association shall be provided
a from such sums as the Association is able to recover from the other parties to the Pooling Agreement as their contributions to the overspill claim, and
b from such sums as the Association is able to recover from any special insurance which may, in the discretion of the Board, have been effected to protect the Association against the risk of payments of overspill claims and
c from such proportion as the Board in its discretion determines of any sums standing to the credit of such overspill reserve as the Board may in its discretion have established in accordance with Rule 56 and
d by levying one or more overspill calls in accordance with Rule 52.5, irrespective of whether the Association has sought to recover or has recovered all or any of the sums referred to in Rule 52.3.A.b but provided the Board shall first have made a determination in accordance with Rule 52.3.A.c, and
e from any interest accruing to the Association on any funds provided as aforesaid.

B The funds required to pay such proportion of any overspill claim incurred by
any other party to the Pooling Agreement which the Association is liable to contribute under the terms of the Pooling Agreement shall be provided in the manner specified in Rules 52.3.A.a - 52.3.A.e.

C To the extent that the Association intends to provide funds required to pay any overspill claim incurred by it in the manner specified in Rule 52.3.A.d, the Association shall only be required to pay such overspill claim as and when such funds are received by it, provided that it can show from time to time that, in seeking to collect such funds, it has taken the steps referred to in Rules 52.2.C.a and 52.2.C.b.

4 OVERSPILL CLAIMS - EXPERT DETERMINATIONS

A Any of the issues referred to in Rule 52.4.B on which the Association and a Member cannot agree shall be referred to a panel ("the Panel") constituted in accordance with arrangements established in the Pooling Agreement which, acting as a body of experts and not as an arbitration tribunal, shall determine the issue.

B This Rule 52.4 shall apply to any issue of whether, for the purpose of applying any of Rules 52.2.B, 52.2.C and 52.3.C in relation to any overspill claim ("the relevant overspill claim")
a costs have been properly incurred in collecting or seeking to collect overspill calls, or
b any overspill call or part thereof is economically recoverable, or
c in seeking to collect the funds referred to in Rule 52.3.C, the Association has taken the steps referred to in that Rule.

C If the Panel has not been constituted at a time when a Member wishes to refer an issue to it, the Board shall, on request by the Member, give a direction for the constitution of the Panel as required under the Pooling Agreement.

D The Board may (and, on the direction of the Member, shall) give such direction as is required under the Pooling Agreement for the formal instruction of the Panel to investigate any issue and to give its determination as soon as reasonably practicable.

E The Panel shall in its discretion decide what information, documents, evidence and submissions it requires in order to determine an issue and how to obtain these, and the Association and the Member shall co-operate fully with the Panel.

In determining any issue referred to it under this Rule 52.4 the Panel shall endeavour to follow the same procedures as it follows in determining issues arising in respect of the relevant overspill claim which are referred to it under the Pooling Agreement.

F In determining an issue the members of the Panel
a shall rely on their own knowledge and expertise, and
b may rely on any information, documents, evidence or submission provided to it by the Association or the Member as the Panel sees fit.

G If the three members of the Panel cannot agree on any matter, the view of the majority shall prevail.

H The Panel shall not be required to give reasons for any determination.

I The Panel's determination shall be final and binding upon the Association and the Member (subject only to Rule 52.4.J) and there shall be no right of appeal from such determination.

J If the Panel makes a determination on an issue referred to in Rules 52.4.B.b or 52.4.B.c the Association or the Member may refer the issue back to the Panel notwithstanding Rule 52.4.I, if it considers that the position has materially changed since the Panel made its determination.

K The costs of the Panel shall be paid by the Association.

L Costs, indemnities and other sums payable to the Panel by the Association in relation to any overspill claim, whether the reference to the Panel has been made under this Rule 52.4 or under the Pooling Agreement, shall be deemed to be costs properly incurred by the Association in respect of that overspill claim for the purposes specified in Rule 52.2.B.a.

5 LEVYING OF OVERSPILL CALLS

A If
a the Board shall at any time determine that funds are or may in future be required to pay part of an overspill claim (whether incurred by the Association or by any other party to the Pooling Agreement); and
b the Board shall have made a declaration under Rules 52.6.A or 52.6.C that a Policy Year shall remain open for the purpose of levying an overspill call or calls in respect of that overspill claim, the Association, in the Board's discretion, at any time or times after such declaration has been made, may levy one or more overspill calls in respect of that overspill claim in accordance with Rule 52.5.B.

B The Association shall levy any such overspill call
a on all Members entered in the Association on the overspill claim date in respect of vessels entered by them at that time, notwithstanding the fact that, if the overspill claim date shall be in a policy year in respect of which the Association has made a declaration under Rule 52.6.C, any such vessel may not have been entered in the Association at the time the relevant incident or occurrence occurred, and
b at such percentage of the Convention Limit of each such vessel as the Board in its discretion shall decide.

C An overspill call shall not be levied in respect of any vessel entered on the overspill claim date with an overall limit of cover equal to or less than the Group Reinsurance Limit.

D The Association shall not levy on any Member in respect of the entry of any one vessel an overspill call or calls in respect of any one overspill claim exceeding in the aggregate two point five per cent (2.5%) of the Convention Limit of that vessel.

E If at any time after the levying of an overspill call upon the Members entered in the Association in any policy year, it shall appear to the Board that the whole of such overspill call is unlikely to be required to meet the overspill claim in respect of which such overspill call was levied, the Board may decide to dispose of any excess which in the opinion of the Board is not so required in one or both of the following ways:
a by transferring the excess or any part thereof to the overspill reserve
(in accordance with Rule 56); or
b by returning the excess or any part thereof to those Members who have paid that overspill call in proportion to the payments made by them.

6 CLOSING OF POLICY YEARS FOR OVERSPILL CALLS

A If at any time prior to the expiry of a period of thirty-six months from the commencement of a policy year (the "relevant policy year"), any of the parties to the Pooling Agreement sends a notice (an "overspill notice") in accordance with the Pooling Agreement that an incident or occurrence has occurred in the relevant policy year which has given or at any time may give rise to an overspill claim, the Board shall as soon as practicable declare that the relevant policy year shall remain open for the purpose of levying an overspill call or calls in respect of that claim and the relevant policy year shall not be closed for the purpose of making an overspill call or calls in respect of that claim until such date as the Board shall determine.

B If at the expiry of the period of thirty-six months provided for in Rules 52.6.A, no overspill notice as therein provided for has been sent, the relevant policy year shall be closed automatically for the purpose of levying overspill calls only, whether or not closed for any other purposes, such closure to have effect from the date falling thirty-six months after the commencement of the relevant policy year.

C If at any time after the policy year has been closed in accordance with the provisions of Rules 52.6.A and 52.6.B, it appears to the Board that an incident or occurrence which occurred during such closed policy year may then or at any time in the future give rise to an overspill claim, the Board shall as soon as practicable declare that the earliest subsequent open policy year (not being a policy year in respect of which the Board has already made a declaration in accordance with Rule 52.6.A and 52.6.C) shall remain open for the purpose of levying an overspill call or calls in respect of that claim and such open policy year shall not be closed for the purpose of making an overspill call or calls in respect of that claim until such date as the Board shall determine.

D A policy year shall not be closed for the purpose of levying overspill calls save in accordance with this Rule 52.6.

7 SECURITY FOR OVERSPILL CALLS ON TERMINATION OR CESSER

A If
a the Board makes a declaration in accordance with 52.6.A or 52.6.C that a policy year shall remain open for the purpose of levying an overspill call or calls, and
b a Member who is liable to pay any such overspill call or calls as may be levied by the Association in accordance with Rule 52.5 ceases or has ceased to be insured by the Association for any reason, or the Board determines that the insurance of any such Member may cease the Board may require such Member to provide to the Association by such date as the Board may determine (the "due date") a guarantee or other security in respect of the Member's estimated future liability for such overspill call or calls, such guarantee or other security to be in such form and amount (the "guarantee amount") and upon such terms as the Board in its discretion may deem to be appropriate in the circumstances.

B Unless and until such guarantee or other security as is required by the Board has been provided by the Member, the Member shall not be entitled to recovery from the Association of any claims whatsoever and whensoever arising in respect of any and all vessels entered in the Association for any Policy Year by him or on his behalf.

C If such guarantee or other security is not provided by the Member to the Association by the due date, a sum equal to the guarantee amount shall be due and payable by the Member to the Association on the due date, and shall be retained by the Association as a security deposit on such terms as the Board in its discretion may deem to be appropriate in the circumstances.

D The provision of a guarantee or other security as required by the Board (including a payment in accordance with Rule 52.7.C) shall in no way restrict or limit the Member's liability to pay such overspill call or calls as may be levied by the Association in accordance with Rule 52.5.

RULE 53: PAYMENT OF CALLS

1 Every call shall be payable in such instalments and on such dates as the Board or the Managers may specify.

2 The Managers may require any Member to pay all or any part of any call payable by him in such currency or currencies as the Managers may specify.

3 As soon as reasonably practical after the Board has decided to levy and collect any calls, the Managers shall give notice in writing to each Member concerned

A of the nature of the call;

B of the amount or amounts payable by such Member in respect of each vessel entered by him;

C of the currency or currencies in which the call is payable;

D of the date on which the call is payable or, if such call is payable by instalments, of the amounts of such instalments and the respective dates on which they are payable.

4 No claim of any kind whatsoever by a Member against the Association shall constitute any set-off against the calls and other sums due to the Association or shall entitle him to withhold or delay payment of the sum specified in a notice given pursuant to paragraph 3 of this Rule.

5 Interest at the rate of 5% per annum over the New York Prime Rate applicable on the date that the debt became due shall be payable by each Member on any calls or other sums due from him to the Association as from the due date of payment. Any interest payable as aforesaid shall accrue from day to day.

6 If any call or other payment due from a Member to the Association (other than an overspill call) is not paid and if the Board decides that payment cannot be obtained, the sums required to make good any resulting shortfall or deficiency in the funds of the Association shall be deemed to be expenses of the Association for which, as the Board may decide, calls may be levied in accordance with Rules 49, 50 and 51, or the reserves may be applied in accordance with Rules 56 and 57.

RULE 54: RELEASES

1 If a Member ceases to be insured under Rules 45 and 46 or his insurance is cancelled under Rules 47 and 48, the Managers may on or at any time after the date of cessation or cancellation, as the case may be, assess the amount which the Managers in their sole discretion consider to represent the estimated liability of the Member for further calls (other than overspill calls).

2 In assessing the estimated liability of the Member for further calls as aforesaid, the Managers may also take into account any contingencies and other special considerations which in the opinion of the Managers are relevant for this purpose (including matters such as inflation and currency fluctuations).

3 The Member shall be under no liability for any calls (other than overspill calls) which the Board may decide to levy after the date of such assessment but shall have no right to share in any return of calls or other payments which the Board may thereafter decide to make in accordance with Rule 57 paragraph 3.

RULE 55: LAID-UP RETURNS

If an insured vessel shall be laid-up in any safe port for a period of thirty or more consecutive days after finally mooring there (such period being computed from the day of arrival to the day of departure, one only being included) the Member concerned shall be allowed a return of calls (other than overspill calls) payable in respect of such vessel for the period of lay-up. Unless otherwise agreed by the Managers in writing the return of calls shall be calculated at the rate of 40% of the total calls payable for risks covered under Rules 2, 3 or 4, and at 15% of calls payable for risks covered under Rule 6. For the purpose of this Rule a vessel shall not be treated as laid-up if she has either crew members (other than for her maintenance or security) or cargo on board, unless the Board shall in its discretion otherwise determine. No claim for laid-up returns relating to any policy year shall be recoverable from the Association unless written notice thereof has been given to the Association within six months of the end of the policy year concerned.

RULE 56: RESERVES

1 The Board may, in its discretion, establish and maintain such reserve funds or other accounts for such contingencies or purposes as it thinks fit.

2 Without prejudice to the generality of paragraph 1 of this Rule,

A the Board may, in its discretion, establish and maintain reserves or other accounts to provide a source of funds which can be applied for any general purposes of the Association including the following: to stabilise the level of additional calls and to eliminate or reduce the need to levy additional calls in respect of any policy year, past, present or future; to eliminate or reduce the deficiency which has occurred or may be thought likely to occur in respect of any closed policy year; to protect the Association against any actual or potential losses on exchange, or in connection with its investments, realised or unrealised; but excluding application towards meeting any overspill claim or claims.

B the Board may, in its discretion, establish and maintain a reserve to provide a source of funds which may be applied towards meeting any overspill claim or claims.

3 The Board may apply the sums standing to the credit of any reserve for any of the purposes for which the reserve was maintained even though the sum be paid in respect of any different policy year or years from that in which the funds originated. The Board may also apply the sums standing to the credit of any reserve (other than an overspill reserve) for any other or different purposes whenever the Board considers this to be in the interests of the Association or its Members. The Board may also at any time transfer sums from one reserve (other than an overspill reserve) to another.

4 The funds required to establish such reserves or accounts may be raised in any of the following ways:

A the Board, when deciding on the rate of any advance or additional calls for any policy year, may resolve that any specified amount or proportion of such calls shall be transferred to and applied for the purpose of any such reserve or account.

B the Board may on the closing of any policy year or at any time or times thereafter resolve that any specified amount or proportion of the funds standing to the credit of that policy year shall be transferred to and applied for the purposes of any such reserves or account.

C the Board may transfer to an overspill reserve any balance of overspill call not required to satisfy the claim or claims in respect of which it was levied, as contemplated in Rule 52.5.

RULE 57: CLOSING OF POLICY YEARS

1 The Board shall with effect from such date after the end of each policy year as it thinks fit declare that such policy year shall be closed and no further additional calls may be levied after that date in respect of that policy year, save for the purpose of levying one or more overspill calls as provided in Rule 52.

2 The Board may declare that any policy year is closed notwithstanding that it is known or anticipated that there are in existence or may in the future arise claims, expenses or outgoings in respect of such policy year which have not yet accrued or whose validity, extent or amount have yet to be established.

3 If upon the closing of any policy year it shall appear to the Board that the whole of the calls and other receipts in respect of such policy year (and of all transfers from reserves and provisions made for the credit of or in respect of that policy year) is unlikely to be required to meet the claims, expenses and outgoings arising in respect of that policy year (as referred to in Rule 49), then the Board may decide to dispose of any excess which in their opinion is not so required in one or any of the following ways:

A By transferring the excess or any part thereof to the reserves of the Association in accordance with Rule 56.

B By applying the excess or any part thereof to meet any deficiency which has occurred or may be thought likely to occur in any closed policy year or years.

C By returning the excess or any part thereof to the Members entered for such policy year in accordance with paragraph 6 of this Rule.

4 If at any time or times after a policy year shall have been closed it shall appear to the Board that the claims, expenses and outgoings arising in respect of that policy year (as referred to in Rule 49) exceed or are likely to exceed the totality of the calls and other receipts in respect of such policy year (and of all transfers from reserves and provisions made for the credit of or in respect of such policy year) then the Board may decide to provide for such deficiency in any one or more of the following ways:

A By transferring funds from the reserves or other accounts of the Association.

B By transferring funds standing to the credit of any different closed policy year.

C By levying advance or additional calls in respect of an open policy year with the intention of applying a part thereof to meet any such deficiency.

5 At any time after any policy year shall have been closed the Board may resolve to amalgamate the accounts of any two or more closed policy years and to pool the amounts standing to the credit of them. If the Board shall so resolve then the two or more closed policy years concerned shall for all purposes be treated as though they constituted a single closed policy year.

6 Any amount which the Board may decide to return to the Members in accordance with paragraph 3 of this Rule shall be returned to the Members entered in respect of such policy year in proportion to the calls paid by them in respect of such policy year (after taking into account any returns or rebates applicable thereto under their terms of entry or under any other provision of these Rules) save that no return shall be made to any Member whose entry ceased in the course of such policy year by reason of Rule 45 or 47 or whose liability for calls in respect of such policy year has been assessed under the provisions of Rule 54.

RULE 58: INVESTMENT

1 The funds of the Association may be invested under the direction of the Board by means of the purchase of such stocks, shares, bonds, debentures or other securities or the purchase of such currencies, commodities, or other real or personal property, or by means of being deposited in such accounts or by means of being loaned on such terms and in such manner as the Board may think fit. The funds of the Association may also be invested by such other method as the Board may approve including investments in and loans to any holding, subsidiary or associated company of the Association on such terms and in such manner as the Board may think fit.

2 The Board may direct that all or any of the funds standing to the credit of any policy year or of any reserve or account shall be pooled and invested either as one fund or two or more separate funds.

3 If any funds shall have been so pooled and invested the Board may apportion as they think fit the income arising on the pooled investments among and between the different policy years, reserves and accounts from which the fund or funds so invested originated. The Board may similarly apportion capital gains and losses and gains and losses on exchange realised and unrealised.

4 Without prejudice to paragraph 3 of this Rule, the Board may direct that after the closing of any policy year that year shall not be credited with any share of the apportionments made under that paragraph and that its share shall instead be credited to any reserve or account maintained by the Association.

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