Claims Handling

1.Registered Claims

 A. All policy years

¡¡¡¡In the 2006 policy year, the reported claims for all policy years totaled 1,654 (including newly registered claims for the 2006 policy year) with an aggregate claim amount of US$ 118.34 million. This represents an increase of 20.6% and 62.5% in comparison with the preceding policy year of 1,372 and US$ 72.82 million respectively (as illustrated by Table 1 below).

B. Policy year 2006

¡¡¡¡There were 1,412 reported claims in the 2006 policy year with an aggregate claim amount of US$ 111.97 million, which represents a 22.1% and 67.6% increase in comparison with the preceding policy year of 1156 and US$ 66.79 million respectively. (as illustrated by Table 1 below)

¡¡¡¡¡¡¡¡¡¡¡¡Table 1

C. Classification of newly registered claims in the 2006 policy year

¡¡¡¡Among the newly registered claims in the 2006 policy year, the types of claim occurring most frequently were claims relating to cargo liability, Club¡¯s instruction and crew illness. The pattern of claim types is consistent with that of policy year 2005. The incident types giving rise to the largest claims, by value are cargo liability, collision liability and loss of or damage to property rank the highest three in terms of claim amount in the 2006 policy year.

¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡Table 2

Table 3
¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡(inUS$10,000)

D. Major claims incurred in the 2006 policy year (claim amount over US$ 400,000 )
¡¡¡¡28 major claims occurred in the 2006 policy year with a total claim amount of US$ 97.95 million. Compared with the 2005 policy year when there were 22 claims and a total claim amount of US$49.91 million, the number of claims in the 2006 policy year increased 27% and the aggregate claim amount increased by 97%. This shows a marked deterioration.

Table 4:
¡¡¡¡¡¡¡¡Major claims incurred in 2006 ( claim amount over US$ 400,000 )

¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡In US$ 10,000

E. Arrest of Ship and Guarantee
¡¡¡¡In the 2006 policy year the Association arranged for securities in various forms for 49 entered ships in the total amount of US$ 20.57 million. The increase in respect of number and amount of securities, by comparing with those provided last year, is 19.5% and 46.7% respectively.

Table 5:

¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡Arrest / Guarantee Cases

¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡in US$ 10,000

2.Claims Settlement

A. Settled claims

¡¡¡¡In the 2006 policy year, 1304 claims occurred in various policy years were settled and closed. The total claim amount is US$ 72.46 million whereas total net payment by the Association is US$ 13.88 million. Comparing with that of 1,233 in policy year of 2005, the number of closed cases increased 5.8%(Table 6).

Table 6
in US$ 10,000

¡¡¡¡Note: Amount of please refer to the Audit Report of Policy Year 2006

B. Report on settlement of major claims (please also refer to our previous reports)

¡¡¡¡2002 policy year

¡¡¡¡£á. M.V. ¡°Le Ye¡± of Cosco Shipping Co., Ltd. encountered severe weather during her voyage from Belgium to Italy on 4 November 2002. 15 containers carried on deck fell overboard. The cargo owner filed a lawsuit against the shipowner in the Guangzhou Maritime Court for a claim of US$1.75 million. At the same time, the cargo owner commenced arbitration in Finland against the combined transport carrier. The Association rejected the claim relying on provisions in the Chinese Maritime Code on deck cargo and the indemnity for loss of goods. The combined transport carrier settled the case with the cargo owner at US$260,000 in the arbitration in Finland. Than the combined transport carrier recovered US$130,000 from the ocean carrier. The ocean carrier in turn sought recovery from the shipowner. The Association was able to settle the case at US$30,000.

¡¡¡¡2003 Policy Year

¡¡¡¡b. M.V. ¡°Le Ye¡± of Cosco Shipping Co., Ltd. carried special cargo for US Navy from US to Katar on 31 March 2003. The cargo stowed on deck collapsed during the voyage. Following orders from the charterer, the vessel temporarily entered a port for re-stowing of the cargo. The cargo interests raised a claim of US$14.28 million for cargo damage plus US$1 million for re-stowage costs. The charterer preemptively lodged suit in the US, knowing that US law is favorable to the carrier to which the shipowner agreed. Cargo interests had no choice but to accept the US jurisdiction. The case was finally settled at US$17,500 by the charterer funding the whole settlement and promising not to seek a recovery from the shipowner.

¡¡¡¡2005 Policy Year

¡¡¡¡c. M.V. ¡°Ping Quan¡± of Cosco Far-reaching Shipping Co., Ltd. collided with breakwater while berthing in Pushan, R. Korea on 3 August 2005, causing serious damage to the breakwater. The Port Authority of Pushan demanded security in the amount of US$2.664 million for the breakwater damage. The Association promptly provided an LOU in order to avoid the detention of vessel. Subsequently, with assistance from the Club Correspondent, surveyor and lawyer, the Association decided an appropriate repair firm by putting the work out to tender. The case was settled with the shipowner paying the repair costs of US$540,000. The Association has retrieved the original LOU.

¡¡¡¡d. M.V. ¡°Zhehai 128¡± of Wenzhou Shipping Co collided with the R. Korean flagged M.V.¡±ILJIN¡± near port Ulsan, R. Korea on 12 June 2005. The latter vessel sank on the navigation route and discharged and escaped oil on the sea surface. All of the crew members were salved. The port authority arrested M.V. ¡°Zhehai 128¡± and requested a bank guarantee in the sum of US$1.31 million to cover the clean-up costs, wreck removal and oil pollution compensation. Although the proportion of collision liability was not decided, the Association settled the case on payment of US$300,000 lump sum to avoid a potentially huge claim.

¡¡¡¡e. M.V. ¡°Feng Shun Shan¡± of Cosco Shipping Co. Ltd. arrived Lagos, Nigeria to discharge calicum carbicle on 30 August 2005. Some rainwater remaining in the hatchcover coaming leaked into cargo hold and came into contact with the barrel containing calicum carbicle. This caused acute decomposition of the cargo of calicum carbicle and resulted in an explosion. 6 stevedores were injured and the local lawyer representing the stevedores put forward a total claim of US$850,000, including medical expenses, loss of income and compensation for mental anguish. The Association authorized the local Club Correspondent to actively negotiate with the Stevedores Union. Eventually direct negotiations between the shipowner and the injured stevedores resulted in a being reached to settle the claim by stevedores for a total sum of US$37,000.

¡¡¡¡2006 Policy Year

¡¡¡¡f. The cases of ¡°Hebei Mercy¡±, ¡°Jiang Xi Guan¡±, ?for details of these cases, please refer to the attachment of this section above below on ¡°major claims incurred in policy year 2006¡±

3. Special Notes for Claims Iincurred in Policy Year 2006

¡¡¡¡A. Marine Casualties (collision, grounding, stranded on reef and damage to hull etc.)

¡¡¡¡In the 2006 policy year, several entered ships were involved in marine casualties such as collision, grounding, stranded on reef and damage to hull. This brought huge financial loss and adverse effect on the relative Members. The Association would like to draw Members attention to such accidents by introducing hereunder some typical cases.

¡¡¡¡a. The entered ship MV ¡°Yang Cheng Hu¡± collided with MV ¡°Chi Bi 8¡± on 12 December, 2006 at Yangzi River Taichang area, Jiangsu Provice due to poor visibility caused by fog. The latter vessel sank with 8 crew missing. The Marine Safety Administration promptly initiated their contingency plan, however, the search and rescue operation was fruitless. As the ship sank on the major shipping lane of the Yangzi River, compulsory wreck removal was ordered. The collision liabilities including the death of crew members, oil pollution and wreck removal, were covered by this Association.

¡¡¡¡b. The entered ship MV ¡°Yue Shun¡± collided with MV ¡°Sheng Song 1¡± at Wusongkou on 18 January 2006 due to poor visibility at material time. The latter vessel capsized and all of the containers fell into the water. With the exception of two crew members who injured their legs, all other crew members were safe and sound. Collision liabilities concerning oil pollution, wreck removal and salvage of containers were covered by the Association.

¡¡¡¡c. The entered ship MV ¡°J. Pioneer¡± collided with the Japanese flagged MV ¡°Confidence¡± while berthing at Mogi, Japan on 23 January 2007. The collision caused damage to the latter ship¡¯s crane.

¡¡¡¡d. For the case of entered ship MV ¡°Zhi Qiang¡±, please refer to ¡°major claims incurred in policy year 2006¡±<9>

¡¡¡¡e. For the case of entered ship MV ¡°Yong An Cheng¡±, please refer to ¡°major claims incurred in policy year 2006¡±<25>

¡¡¡¡f. For the case of entered ship MV ¡°Tong Cheng¡±, please refer to ¡°major claims incurred in policy year 2006¡±<26>

¡¡¡¡g. For the case of entered ship MV ¡°Jin Ying¡±, please refer to ¡°major claims incurred in policy year 2006¡±<27>

¡¡¡¡All seven cases mentioned above can be attributed to human error.

¡¡¡¡The Association would like to remind Members to pay attention to the characteristics of these cases and take relevant loss prevention measures in accordance with the Association¡¯s Loss Prevention Circular (especially 2007 No.2 published recently) and the Advisory Service.

B. Oil Pollution Incidents (oil spill while discharging bilge water )

¡¡¡¡During the 2006 policy year, the entered ship MV ¡°Hebei Mercy¡± arranged for a barge to receive bilge water from the ship during loading operations at Xiamen. After the operation, oil spillage was found around the vessel. An officer from the Marine Safety Administration boarded the vessel to take statements from the crew and collect samples of oil spillage. Meanwhile, the pilot station near Haitian jetty informed the MSA that a 200 meter long black oil spill had occured. The MSA initiated their investigations immediately. After an analysis of the tidal condition and other facts, the MSA delivered their preliminary findings: they concluded that crew on the barge did not follow the operation manual¡¯s instructions for bilge water discharge. The crew failed to secure the discharging tube which resulted in the tube swinging and leaking the bilge water into the sea.

¡¡¡¡After the incidents occurred, several of the local media made reports on the incidents and it became highlight of the local news and the focus of community.
With the development of economy and progress of society, people will become increasingly aware of environmental issues and the need for protecting the environment and resources. Consequently, claims for environmental damage will increase and crew should pay special attention whilst entering or leaving port cities, especially areas of seaside tourism and environmentally sensitive areas.
The Association provided invaluable assistance to the Members on such issues. For more detailed advice and guidance on these issues, please refer to the Association¡¯s Loss Prevention Circular 2006 No.9.

C. Accidents involving logs which fallen overboard

¡¡¡¡In the 2006 policy year, several accidents occurred when entered ships carrying logs have had cargo fall overboard. These accidents brought huge losses to the Members involved. For details please refer to ¡°major claims incurred in policy year 2006¡± <2>, <8>, <24>. The cause of these accidents can be divided into two categories. First, crew negligence in ensuring ship stability causing logs to slide from top of stow. Second collapsing of stow due to severe weather conditions. Log transportation is a specialised type of carriage involving high risks. Members engaging in such trade must be on guard at all times regarding safety. Even minor negligence in safety management may cause serious consequences and cause substantial damage. The Association would like to draw Members attention to Loss Prevention Circular 2007 No.1 issued on February 2007.

D. The Asbestos Issue

¡¡¡¡In the 2006 policy year, the entered ships MV ¡°Jin Qiang¡± and MV ¡°Xin Qiang¡± carried steel products to Lavena, Italy. The stevedores suspended the discharge when asbestos was discovered on some of the steel cargo. They refused to resume discharge unless the substance was cleaned up. The consignee applied to the local court to detain the vessel, and demanded security in the amount of €13 million for contamination of cargo. It turned out that all the cargo involved was hot rolled steel coil. In the production process, asbestos was used as heat insulation material. The hot rolled steel coils were put onto the asbestos for cooling. As such, some asbestos remained attached to the coils. When the coils arrived in the countries banning the use of asbestos, such as Italy, the consignee detained the vessel and raised substantial claims under local laws.

¡¡¡¡The Association would like to remind Members to thoroughly inspect the cargo for asbestos when carrying steel cargo into countries banning the use of asbestos. Members should instruct their crews to pay special attention to asbestos. Once the substance is found on cargo, Members should inform the Association immediately. The Association will bring this to the surveyor¡¯s attention in the preloading survey. In the meantime, the Association recommends that Members insert an asbestos clause into their charter parties. For detailed advice, please refer to Club Circular on Claim Handling 2006 No.9.

E. Necessary Documents on board

¡¡¡¡In the 2006 policy year, the entered ship MV ¡°Tong Xin Quan¡± carried containers from Hongkong to Dalian. During Custom Inspection in Zhejiang, It was found that 8 containers were loaded with electronic products subject to the import licensing of China while the packing lists of these containers were not on board. The Customs Authority considered carriage of goods subject to import licensing without legal documents, such as packing lists, should be treated as an act of smuggling, and so the cargo confiscated. The master and consignee applied for administrative reconsideration, and then lodged administrative litigation at the local court, but both efforts failed. The consignee then sued the contractual carrier, and in turn, the contractual carrier sued the actual carrier, the shipowner. The court held that the contractual carrier and shipowner were to share liability for the damages in equal shares. Furthermore, the court expressly asserted that the master shall keep packing lists on board and clarified the consequences of failing to carry documents such as packing lists on board.

¡¡¡¡Under such circumstances, the Association would like to remind Members to keep legal documents such as packing lists on board when carrying cargo subject to import licensing, in order to avoid confiscation of the cargo and other serious consequences such as losing exemption of liability and limitation of liability. For details, please refer to the Club Circular on Claim Handling 2006 No.10.

F. Criminal liability in marine casualties on Chinese waters

¡¡¡¡The Supreme People¡¯s Procuratorate of the People¡¯s Republic of China jointly with three other Ministries issued the Opinion Regarding the Timely Transfer of Cases in Administrative Enforcement that are Suspected of Involving Crimes (referred hereafter as the Opinion) on 26 January 2006. The Opinion urges administrative authorities to transfer cases which have reached the standard for criminal prosecution or suspected involvement in crimes to law enforcement organisations. In the marine casualty section, the Opinion attracted the attention of the Administration of Maritime Affairs on the criminal liability of master and crew and the timely transfer of the master or crew who may be involved in the crime of causing traffic casualties.?

¡¡¡¡At 23:00 on 18 January 2007, the entered ship M.V. ¡°Yue Shun¡± collided with the M.V. ¡°Sheng Song 1¡± near Wai Gao Qiao, Shanghai. The latter vessel sank due to water ingress, and 14 crew members fell into the water. The 165 containers with an aggregated value of RMB 20 million carried on the M.V. ¡°Sheng Song 1¡± were all lost in the Yangzi River. On the afternoon of 28 January, the Maritime Policy Department of Shanghai detained the master of the M.V. ¡°Sheng Song 1¡± on charges of causing traffic casualties.
For detailed information please refer to Club Circular 2007 No.4.

Attachment: ¡°major claims incurred in policy year 2006¡±

¡¡¡¡<1> The M.V.¡°Bang Fu¡± of Pacific King Shipping Holding Pte.Ltd discharged sugar cane molasses in R. Korea on 24 February 2006. A shortage of approximately 1000mt was found, but none of the surveyors could determine the reason of cargo shortage. Meanwhile, it was discovered that the brix value was lower than B/L description due to high moisture content. The Association arranged a condition survey for the vessel when the vessel came back to the Chinese ports. The cargo interests put forwarded a claim for US$600,000 and demanded security in that amount. The Association is now engaged in negotiation with the cargo interests.

¡¡¡¡<2> The M.V. ¡°Bang Yuan¡± of Pacific King Shipping Holding Pte.Ltd carried 1421 logs from Malaysia to India on 17 March 2007. During the loading process, the vessel developed a list and this caused 426 logs stowed on deck to fall overboard. The cargo interest raised a claim for US$700,000. In the negotiation with the cargo interests, the Association stressed that the applicable law in this case should be the local law of load port in Malaysia. As such, the Association was able to settle the case at US$98,000 according to the package limitation under Malaysian law.

¡¡¡¡<3> The M.V. ¡°You Shun¡± of Guangzhou Zhenxing Shipping Co. Ltd. collided with the HK flagged MV ¡°Chang Xing¡± near Guishan Island, Zhujiangdou, while carrying 26,001mt of coking clean coal from Rizhao to Guangzhou. The collision resulted in water ingress into the engine room, causing the vessel to lose power. With the exception of one missing and one severely injured, all the crew were safe and sound. Salvage for the vessel was successful. The cargo owner raised a claim for cargo shortage in the amount of RMB790,000. The Association reached a settlement agreement with the cargo owner at RMB600,000, and then filed a suit in Hongkong against MV ¡°Chang Xing¡±.

¡¡¡¡<4> The M.V. ¡°Ju Yuan¡± of Dalian Ocean Shipping Co arrived at the oil refinery dock of Ningbo on 12 April 2006. The auxiliary engine stopped due to a malfunction of the air system in engine room. The vessel collided with No.2 and No.3 floating jetty of Beilun Nanyang Co. under the combined force of currents and navigation inertia. The Nanyang Co. put forward a claim of RMB 4.57 million for direct and indirect loss. The Association settled the case at RMB1.3 million after substantial negotiations.??

¡¡¡¡<5> The M.V. ¡°Hebei Mercy¡± of Hebei Ocean Shipping Co Ltd encountered a shower while discharging soybeans in Tianjin Xigang on 17 April 2007. Due to malfunction of the compression system, the hatch covers were not closed in time, and approximately 2600mt of cargo was wet damaged. The cargo owner and cargo insurer demanded security in the amount of US$600,000. In order to urge the cargo interests to speed up salvage of the damaged cargo and minimize potential losses, the Association appointed a surveyor to negotiate with the cargo interests. The surveyor pressed hard to lower the amount of damages. The case was finally settled at RMB 645,000 with the shipowner contributing RMB 500,000.??

¡¡¡¡<6> The M.V. ¡°Xu Chang Hai¡± of Cosco Bulk Carrier Co., Ltd encountered heavy weather on 22 April 2006, while carrying steel products from Turkey to the USA. The heavy weather resulted in serious damage to the cargo. The Association immediately arranged a survey for damages. In November, the cargo interests put forward a demand for security in the amount of US$1.5million and requested English jurisdiction. The Association is now under negotiation with the cargo interests on LOU issue.

¡¡¡¡<7> The M.V. ¡°An Ze Jiang¡± of Cosco Shipping Co., Ltd arrived at Durban, South Africa for discharge on 11 May 2007. A machine weighting 34 tons fell on the ground during discharge operations due to the steel wire rope on the ship¡¯s crane breaking suddenly. The accident caused serious damage to the machine. The consignee put forward a total loss claim of US$715,000 and requested LOU in that amount. After the accident, surveyors from both parties performed a strength test on the steel wire rope and analysed the possible cause of sudden break. However, no exceptional circumstances were found. The Association is now actively collecting evidence for defence of the claim and to make a recovery.

¡¡¡¡<8> The M.V. ¡°Fu Wang¡± of Pacific King Shipping Holding Pte. Ltd. loaded logs bound for India from Malaysian ports in June 2006. On 14 June, at the second load port, the vessel developed a list of 20 degrees due to an operational error of the crew, resulting in 1400 of the logs stowed on deck falling into the sea. The shipper and bills of lading holder raised a claim of US$2.24 million and demanded that the Association put up security. The Association successfully invoked package limitation under Malaysian local law and persuaded the cargo interests to accept settlement at US$430,000.?

¡¡¡¡<9> The M.V. ¡°Zhi Qiang¡± of Cosco(HK) Shipping Co. Ltd. stranded on reef near Papua New Guinea on 1 July 2006 while carry 36,750 mt of brown sugar en route from Australia to R. Korea. The accident resulted in water ingress into hold No.1 and No.2. The shipowner signed salvage contract incorporated SCOPIC clause. The co-insurer arranged security in the amount of US$8 million under the SCOPIC clause and US$100,000 for fines. Another security in the amount of US$20 million was confirmed for cargo damage. The case involved several risks covered by the Association. And the Association is now actively handling the case.

¡¡¡¡<10> The M.V. ¡°Pangani¡± of Chinese-Tanzanian Joint Shipping Co. made contact with an underwater cement pillar while berthing at Mombasa, Kenya on 5 July 2006. The accident resulted in water ingress into hold No.4 and caused wet damage to bagged rice in said cargo hold. The consignee claimed US$900,000 against the shipowner and arrested the vessel. Kenya has implemented Hamburg Rules into its national laws, making the shipowner¡¯s defence very difficult. To avoid huge potential loss, the Association settled the case with claimant at US$255,000 with the assistances of the Club¡¯s correspondent and the shipowner¡¯s representative.

¡¡¡¡<11> The M.V. ¡°Ling Quan He¡± of Cosco Container Lines Co Ltd collided with a jetty in Zhanjiang on 16 July 2007. The accidents caused damage to the underwater pillar of the jetty. The Port Authority put forward a claim for direct and indirect loss in the aggregate amount of RMB 21.90 million. Following negotiations, the Port Authority agreed to lower their demand for security to RMB 2.5 million. The case was finally settled at a lump sum of RMB 1.6 million after several rounds of negotiation.

¡¡¡¡<12> The M.V. ¡°Heng Tai¡± of Ningbo Beilun Marine Shipping Co loaded 7,555 mt of steel cargo and 7,615 mt of chemical products bound for Aden, Yemen at Zhangjiagang in July 2006. On 17 July, some of the cargo was found to be wet damaged upon discharge. The consignee applied to arrest the vessel through the local court and demanded a bank guarantee in the amount of US$1.863 million. The Association immediately dispatched personnel to deal with the case alongside the shipowner¡¯s representative. Through great efforts by the Association and the shipowner, the case was finally settled with the shipowner paying US$500,000 for steel cargo damage and US$162,500 for chemical product damage. The vessel was finally released after being arrested for 2 months.

¡¡¡¡<13> The M.V. ¡°Yu Yin¡± of Shanghai Yuhai Shipping Co carried steel products from Lianyungang to R. Korea on 21 July 2006. Part of the cargo was found to be wet damaged by salt water upon discharge. The vessel was arrested on the 26 July. The cargo interests demanded security in the amount of US$1.7 million. The Association appointed a lawyer to negotiate with the cargo interests. A settlement agreement was eventually reached at US$ 385,000. As no preloading survey had been carried out on the cargo, it was impossible to determine whether the damage was caused before loading or during the voyage. The Association agreed to indemnify the Member with US$150,000 and the case was closed.

¡¡¡¡<14> The M.V. ¡°Han Zhong Men ¡± Nanjing Ocean Shipping Co. Ltd. loaded 17,060 mt of bagged sugar in India on 29 July 2007. Some of the cargo was found? to be contaminated and wet damaged at the discharge port Karachi, Pakistan. The consignee suspended the discharge operation and requested a guarantee of US$6 million. The Association dispatched personnel to Karachi to deal the case with the shipowner¡¯s representative. The Association tried every possible way to release the vessel, and even resorted to diplomatic channels. Eventually, the local court gave their verdict for the compulsory discharge and release of the vessel. The consignee then filed a suit in the local court claiming for US$10.18 million.???

¡¡¡¡<15> The M.V. ¡°Qing Jiang¡± of Cosco Shipping Co. Ltd. carried 13,000 mt of steel products from Lianyungang to Yemen in June 2006. The vessel arrived at Aden on 31 July for discharge. Two consignees considered the cargo was with serious rust damage and arrested the vessel through the local court. They demanded a bank guarantee for US$800,000. Through negotiations, the Association successfully persuaded the claimants to accept a bank guarantee of US$400,000. The Association is currently handling the case.

¡¡¡¡<16> The M.V. ¡°Zhuang He¡± of Cosco Container Lines Co. Ltd. collided with the M.V. ¡°Ming Yang Zhou 133¡± in Hongkong waters on 1 August 2006. Due to water ingress, the latter vessel grounded on the beach. After the accident, the latter vessel put forward an aggregate claim of RMB8.27 million for damage to the vessel, cargo damage, towage, salvage, and crew property. After negotiation, the case was finally settled at RMB1.13million. The H&M risks and P&I risks of the MV ¡°Zhuang He¡± are all covered by the Association. The liability was divided between the two by 3/4 and 1/4.

¡¡¡¡<17> The M.V. ¡°Chipolbrok Moon¡± of Chinese-Polish Joint Stock Shipping Co. was loading at Antwerp on 16 August 2006, when a heavy cargo 9.9 meters long weighting 154 tons fell off the ship¡¯s crane. The heavy cargo smashed onto the barge beside the vessel. The barge sank with one of the barge owners dying immediately upon impact. The Port Authority arranged a bidding for refloating of the barge and the heavy cargo. The cargo was not damaged, but the barge was considered as scrap. To avoid the arrest of the vessel, the Association provided 3 LOUs in the aggregate amount of Euro 4.15 million. The Association is currently handling the case.

¡¡¡¡<18> The M.V. ¡°Jiao Cheng¡± of Cosco Shippping Co. Ltd. carried soybean meals from India to Shanghai in August 2006. At 03:09 on 20 August, the officer on duty felt the vessel shake slightly. Later it was discovered that the vessel made contact with an unidentified object resulting in an underwater crack of 2 meters by 8 meters in hold No.1. The accident caused water ingress into the hold. The vessel resumed the voyage to Shanghai after temporary repairs in Singapore. Two consignees raised claims for RMB 7 million. On 26 December, the consignees applied for the arrest of the ship¡¯s sister vessel the M.V. ¡°Xiang Cheng¡± in the Dalian Maritime Court. The Association provided letters of undertaking in the amount of RMB 5 million and RMB 2.5 million respectively. The legal proceedings for this case are currently being completed

¡¡¡¡<19> The M.V. ¡°Xue Hai¡± of Qingdao Ocean Shipping Co. collided with the jetty due to an operational error of the pilot while berthing at Huaneng Power Station pier in Taicang, Jiangsu Province on 28 August 2006. The impact caused damages of various degrees to both the vessel and the jetty. The pier company put forward a claim of RMB 4 million. The case is currently under negotiation.

¡¡¡¡<20>The M.V. ¡°An Shun Jiang¡± of Cosco Shipping Co. Ltd. discharged chemical products in Lagos, Nigeria on 15 September 2006. A local lawyer alleged that 65 stevedores sustained injuries during the discharge operation and claimed damages for US$500,000. After investigation, it turned out that the shipowner had distributed protection suits to the stevedores, but the stevedores did not use the protection suits during work. As such, they developed some uncomfortable symptoms. The Association has appointed the Club¡¯s Correspondent and lawyer to negotiate with the stevedores¡¯ representatives.

¡¡¡¡<21> The M.V. ¡°Jiang Xi Guan¡± of Cosco Shipping Co. Ltd. carried gesso from Singapore to R. Korea on 17 September 2006. Upon discharge, a large portion of the cargo was found wet damaged and caked due to water leakage into the cargo hold. The consignee suspended discharge immediately and alleged to reject all the cargo. A claim of US$950,000 was raised against the shipowner. The Association appointed a surveyor to investigate the extent of the damage and instructed Club¡¯s Correspondent and lawyer to actively negotiate with the cargo interests. Eventually, the case was settled at approximately US$10,000.

¡¡¡¡<22> The M.V. ¡°Jin Qiang¡± of Cosco(HK) Shipping Co. Ltd. discharged steel products in Lavena, Italy. The consignee detained the vessel through the local court alleging that the cargo was contaminated by asbestos. The consignee demanded security of Euro 13 million. Following negotiation, the Association provided LOU in the amount of Euro 450,000 and the vessel was released. The probable cause of this damage is inherent vice of the cargo, which may enable the shipowner to obtain a recovery from the charterer or shipper. The Association is currently handling the case.

¡¡¡¡<23> The M.V. ¡°Tai Kang Hai¡± of Cosco Bulk Carrier Co. Ltd. arrived at New Orleans USA on 26 November 2006 carrying steel products from Xingang, Tianjin. The vessel encountered severe weather conditions en route causing seawater damage and physical damage to the steel products. The consignee put forward a claim of US$400,000 through lawyers in the UK and demanded security for the claim. The Association promptly appointed a cargo survey through the Club¡¯s Correspondent and instructed them to closely follow up the salvage sale of the damaged cargo to determine the actual loss. The Association is currently handling the case.

¡¡¡¡<24> The M.V. ¡°Bang Yuan¡± of Pacific King Shiping Holding Pte.Ltd. carried logs from Burma to India on 13 December 2006.The vessel encountered heavy weather en route causing green seas on the starboard deck. The vessel developed a list due to a change in stability, resulting in 936 logs weighting approximately 836 mt falling overboard. The cargo interests raised a claim of US$ 715,000. The Association immediately appointed a lawyer to collect evidence the claim was reported. The Association is closely following up the developments.

¡¡¡¡<25> The M.V. ¡°Yong An Cheng¡± of Xiamen Ocean Shipping Co. carried tapioca chips from Thailand to Lianyungang on 18 December 2006. The anchor chain slid off and made a hole on the vessel¡¯s hull, resulting in substantial amount seawater entering into hold No.2. The vessel entered Zhoushan port for repairs and discharged part of the cargo into barges. After repairs were completed, the vessel along with the barge headed for the original destination, Lianyungang. Upon discharge, approximately 6000 mts of cargo was found to be wet damaged by seawater. The Association provided LOU in the amount of US$840,000 to the cargo interests and appointed a lawyer to prepare for defence of the claim.

¡¡¡¡<26> The M.V. ¡°Tong Cheng¡± of Xiamen Ocean Shipping Co. loaded cargo in China and R.Korea bound for Cuba, Dominica and Honduras on 18 January 2007. A crack was found on the bottom of Hold No.2 during voyage. Seawater combined with a slight amount of diesel oil entered into the cargo hold. For safety purpose, the shipowner directed the ship to enter the nearest port Hawaii for repair. The US Coast Guard initiated the oil pollution contingency plan and ordered substantial oil pollution prevention measures to be carried out. The estimated total cost of the oil pollution prevention measures amounted to US$7.45 million. In the meantime, a cargo owner in R.Korea has put forward a demand for security of US$1.5 million. The Association is currently handling the case.

¡¡¡¡<27> The M.V. ¡°Jin Ying¡± of Tianjin Shipping& Enterprises(Group) Co. carried 4766 mts of general cargo from Xingang, Tianjin to Inchon, R.Korea on 24 January 2007. The vessel stranded on reef 50 nautical miles outside Inchon.? At the material time, there were approximately 60 mt of fuel oil and 20 mt of diesel oil onboard. After the accident, the Coast Guard of R. Korea arranged for the vessel to pump out the oil onboard. The vessel broke into two and sank on 27 January. The local government ordered a compulsory wreck removal, as the vessel sank at aquatic breeding area. Public bidding for wreck removal is currently being completed.

¡¡¡¡<28> The M.V. ¡°Yang Cheng Hu¡± of Dalian Ocean Shipping Co. collided with the MV ¡°Chibi 8¡± on 12 December 2006 in Yangzi River near Taicang, Jiangsu Province. The latter vessel sank with 8 crew missing. Following negotiations with the family members of the missing crew, settlement agreements were reached with the shipowners of both vessels paying compensation of RMB 2.34 million in total, of which RMB1.44 million was shared by the shipowner of the MV ¡°Yang Cheng Hu¡±. The Member also provided a cash deposit of RMB 400,000 for a search and rescue operation and RMB670,000 for a sweeping survey and an oil pumping operation to the MSA of Taicang. The Association is actively providing assistance to the Member in handling the claim.

Financial Statement

1. Claims in all policy years and estimation of liability
¡¡ ¡¡For all policy years, from the establishment of the Association on 1st January 1984? to 20th February 2007, there are currently 2,373 open cases with an aggregate claim amount of US$ 292.82 million. The Association¡¯s estimated liability in these claims is US$ 68.62 million, with an estimated loss ratio of 23.4%. In comparison with the proceeding policy year, this is an increase of 343 cases (representing an increase of 16.8%). The claim amount increased US$25.87 million (an increase of 9.6%) and the estimated liability increased US$26.36 million (an increase of 38.4%). The estimated loss ratio increased 7.6%. This represents a substantial deterioration in the claims.

2. Assets
¡¡¡¡According to the Audit Report of the 2006 policy year, the total assets of the Association amounted to US$218.14 million. This represents an increase of 31.2% compared to the US$ 166.19 million in the last policy year, a net increase of US$ 51.95 million. This increase is mainly attributed to the huge increase in net assets of the listed companies the Association invested in.
¡¡¡¡The free reserves of the Association amounted to US$164.48 million, increasing by a further US$46.72 million when compared to the US$117.76 million of the last policy year, a net increase of 39.67%. This increase can be attributed to the increase in the net value increase of investment.

3. Free Reserves per GT
¡¡¡¡Calculating at total tonnage of 14.46 million GT in the 2006 policy year, the free reserves per GT is US$11.37. Compared to US$9.13 per GT in the last policy year, this represents an increase of 24.5%, or a net increase of US$2.24 per GT. Had the? calculation been made based on the total tonnage of 12.88 million GT in the last policy year, then the free reserves per GT would be US$12.77 per GT, representing a net increase of 39.8%.

¡¡¡¡Note: The increase rate was 2006/2005 figure
¡¡¡¡Under such circumstances, the Association would be placed first for the last six consecutive years compared with Clubs in the International Group of P&I Clubs (with the exception of small Club as SOP).