Underwriting

1. The Entry

Technical underwriting kept on developing steadily and the entered tonnages increasing greatly in the policy year of 2003. During that policy year 170 ships totaling 1.6 million GT newly entered in the Association, while 94 ships totaling 834,000 GT were withdrawn from insurance by reason of the sale of ships or the failure of the shipowners to pay calls due to the Association. By 20 Feb. 2004, the Association has 106 Members and 687 entered ships totaling 8.70 million GT. The aggregate of entered tonnages in the policy year of 2003 increased 760,000 GT, 9.57 % higher than that in the policy year of 2002. The policy year of 2003 is the year in which the entered tonnage reached the peak over the last 10 years.

The main reason of the increase of the tonnage entered in the Association is the expanding of the fleets by the shipping companies by virtue of the recovery of shipping industry worldwide in 2003. Besides, the effective work done by the Managers in respect of the underwriting quality and quantity, the growing confidence of the Members in the Association attributing to the great increase of the total funds and free reserves kept by the Association and the professional services provided by the Managers, promote such remarkable increase.

2. Collection of Calls

The situation of collection of calls was much improved in the policy year of 2003 due to the favorable turn of the global shipping industry and the tightening measures taken by the Managers in collecting calls and fees.

As of 20th Feb. 2004, the aggregate amount of unpaid calls due from the Members to the Association was USD3.457 million, decreased by 47% compared with that of the last year. The ratio of the unpaid calls to the total funds of the Association reduced from last year's 6.4% to this year's 2.79%, falling by 3.61%. The following table shows the details:

The Managers achieved great improvement in collecting calls in the policy year of 2003. The increase of the income of the Members by virtue of the recovery of the global shipping industry is a very important factor. Secondly, the Managers applied a strict principle of quality control to the members. The insurance of some shipowners of poor reputation was cancelled by the Managers due to their failure of paying calls. Thirdly, the Directors' companies set good examples for the others in paying calls in due course.

Nevertheless, the Managers by this opportunity, invite the Member's once again to give special attentions and supports in this respect.

3. International Co-Insurance

During the past year of 2003, the Managers did their best to conclude renewal agreements in respect of the co-insurance with some of the International Group of P&I Associations respectively and finally managed to control over the range of increasing costs within the budget. Even so, the costs for co-insurance in 2003 policy year still increased by 30.7 % as compared with that in the last year, because of the high loss ratio in the past years of the Association and the high general increase rate in the international P&I reinsurance market. This brought about the highest increase in costs following the last year's increase of 37.7 %.

The Managers, therefore, expect that all Members continue to take necessary steps for loss prevention work and pay close attention to the handling of large claims, so as to avoid catastrophic accidents and occurrences and to decrease the insurance costs.