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					          James, Brennan & Associates
          Actuarial and Management Consultants




   Scheme report for the transfer of insurance business
                       pursuant to
      The Financial Services and Markets Act 2000


                              From

     The Standard Steamship Owners' Protection & Indemnity
                 Association (Bermuda) Limited

                                 and

           The Standard Steamship Owners' Protection &
             Indemnity Association (London) Limited

                                 and

           The Standard Steamship Owners' Mutual War
                    Risks Association Limited

                                To
     The Standard Steamship Owners' Protection & Indemnity
                  Association (Europe) Limited




D James
Fellow of the Institute of Actuaries

Date of report:
5 October 2011
                James, Brennan & Associates
            Actuarial and Management consultants


Contents
  1.     Scope of the report
  2.     The party commissioning this report and bearing the reporting expert’s
         costs
  3.     Confirmation by the FSA of approval of appointment as an expert
  4.     Statement of professional qualifications
  5.     Statement of interest that may be deemed to influence independence
  6.     Background to the Scheme, its overall context and purpose
  7.     Information used in preparing this report
  8.     Reliance placed on the data provided and on the judgement of others
  9.     The analytical approach taken and the likely effect of the Scheme on
         the policyholders of transferor and transferee portfolios
  10.    Opinion


Appendices
  1.    Professional experience of D James
  2.    Schedule of information provided in consideration of this report
  3.    Standard Group structure chart and simplified schematic pre- and post-
        transfer
  4.    Key terms and abbreviations




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1.           Scope of the report

      1.1.       This report is provided in relation to the proposed transfer of rights and
                 liabilities relating to insurance business undertaken by:

                 The Standard Steamship Owners' Protection & Indemnity
                 Association (Bermuda) Limited (referred to as "Standard Bermuda” or
                 “SB");

                 The Standard Steamship Owners' Protection & Indemnity Association
                 (London) Limited (referred to as "Standard London" or “SL”);

                 The Standard Steamship Owners' Mutual War Risks Association Limited
                 (referred to as "Standard War Risks" or “SW”);

             which are to be transferred to:

                 The Standard Steamship Owners' Protection & Indemnity
                 Association (Europe) Limited (referred to as "Standard Europe" or “SE”)

     1.2. The entities are jointly referred to as "the Parties". All the Parties are managed
          by companies within the Charles Taylor Consulting plc Group (“CTC” or
          "Manager").

     1.3. The Parties are mutual associations, whose members include insured
          shipowners and charterers, and are commonly known as P&I Clubs (“Clubs”)
          or War Risk clubs. The Parties are all also members of the International
          Group of P&I Clubs (“IG”) or the Combined Group of War Risk Clubs
          (“CGWRC”). I describe the parties and their primary relationships with related
          entities in detail in section 6.

     1.4. SE, SL, SW and the UK operations of SB are all regulated by the FSA. The
          business to be transferred ("the Business") consists of all of the insurance and
          reinsurance risks underwritten by SB,SL & SW, which is marine insurance
          provided to shipowners, ship operators or charterers known as protection and
          indemnity insurance (“P&I insurance”) or hull war risks and related covers.

     1.5. This transfer of business is an insurance business transfer scheme between
          SB,SL,SW and SE (“the Scheme” or "the Transfer"), as defined in Part VII of
          the Financial Services and Markets Act 2000 ("FSMA").

     1.6. Following the Transfer it is intended to de-authorise SL,SW and the UK
          branch of SB.

     1.7. I, Dewi James have been appointed by CTC, to consider the Scheme and to
          prepare a Scheme Report as is required, under section 109 of FSMA, to
          accompany an application to approve the Scheme. This is a Scheme report as


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     defined in section 109 of FSMA in respect of the Scheme. No use may be
     made of this report for any other purpose.

1.8. I am aware that copies of this report may be made available to policyholders
     as well as to all parties affected by the Transfer. In addition, I note that this
     report will be accessible to the public.

1.9. This report must be read in its entirety since individual sections of this report
     could be misleading if considered in isolation from each other.

1.10. I confirm that I have read

         -   Part 35 of the Civil Procedure Rules,
         -   Practice Direction 35 – Experts and Assessors, and
         -   The Civil Justice Council Protocol for the Instruction of Experts to
             give Evidence in Civil Claims dated June 2005, amended October 2009.

1.11. In reporting on the Scheme as Independent Expert I recognise that I owe a
      duty to the High Court to assist in matters relating to my expertise. This duty
      overrides any obligation to any person from whom I have received
      instructions or by whom I am paid. I confirm that I have made clear which
      facts and matters referred to in this report are within my own knowledge and
      which are not. Those that are within my own knowledge I confirm to be true.
      The opinions I have expressed represent my true and complete professional
      opinions on the matters to which they refer.

1.12. This report and the work undertaken in its production is not intended to be an
      audit, or form part of any due diligence and should not be relied upon as such.
      It has been produced solely for the purpose of enabling me to express my
      opinion on the impact of the Transfer upon the affected parties.

1.13. This report does not comply with Actuarial Guidance Note GN12 “General
      Insurance Business: Actuarial Reports” as adopted by the Board for Actuarial
      Standards ("BAS") because the level of technical detail concerning the
      determination of reserves and modelling assumptions normally found in an
      actuarial report is not, in my opinion, appropriate to be described in this
      report in order to meet the needs of the Court and affected parties. I have
      relied upon the analytical work of the professional staff of the Parties and
      their advisors to be consistent and accurate. In assessing the technical analysis
      I have applied principles of proportionality as I consider relevant in the
      context of this report, which are described in sections 8 and 9.

1.14. My responsibilities and liabilities and those of James, Brennan & Associates
      are limited to policyholders of SB,SL,SW and SE, affected parties and the
      Court and may arise only in the respect of the use of my report for the
      purpose set out above. Neither James, Brennan & Associates nor I will accept
      any liability or responsibility in relation to the use of this report for any other
      purpose.


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2.          The party commissioning this report and bearing the reporting expert’s
            costs

     2.1.       CTC commissioned the report on behalf of Standard Bermuda which is
            bearing the expert’s costs.



3.          Confirmation by the FSA of approval of appointment as an expert

     3.1.       I confirm that my appointment for the purpose of producing this report
            has been approved by the Financial Services Authority (“FSA”)



4.          Statement of professional qualifications

     4.1.       Details of my qualifications and experience are shown in Appendix 1.



5.          Statement of interest that may be deemed to influence independence

     5.1.       Neither I, nor James, Brennan & Associates have any commercial
            connection with any of the Parties, nor any conflict of interest arising from
            the preparation of this report.




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6.        Background to the Scheme, its overall context and purpose

     6.1. The Parties do not constitute a group of companies in the strict sense, but are
          closely linked either through SB exercising voting control or through common
          branding, management, IT systems and the reinsurance arrangements both
          between the Parties and other companies bearing the Standard name and
          through risk pooling arrangements with the wider International Group of P&I
          Clubs ("IG") or, in the case of Standard War, though the smaller risk pool
          arranged through the Combined Group of War Risks Associations
          (“CGWRC”). I use the terms "Standard Group" or "Group" to refer to the
          linked entities bearing the Standard name, not all of which are directly
          involved in the Scheme.
     6.2. Many P&I clubs, including some of the Parties, write more than one Class of
          risk, for example, P&I risks and Defence risks, which are treated as distinct
          Classes with separate members, rules, funds and accounting arrangements
          within the P&I Club.
     6.3. My comments together with any implications arising from the proposed
          Transfer are set out under the following sub-headings:

          −   P&I Clubs and business Classes
          −   Overall scale of the transfer and relative size of the Parties, by Class
          −   Pre-transfer Group structure
          −   Brief background of the Parties and other members of the Standard Group
          −   Governance and operational management of the Parties
          −   Risk Pooling agreements – IG and CGWRC
          −   The Standard Bermuda Guarantee and financial support to the Parties
          −   Summary of the chain of security
          −   Nature of the Scheme




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- P&I Clubs and business Classes

6.4. P&I clubs are mutual insurance associations with shipowner and charterer
     members, controlled by a board of directors drawn mainly from the
     membership and the Manager. The Clubs provide protection and indemnity
     insurance to shipowners, operators and charterers in respect of their liabilities
     to third parties arising out of ship operations.

6.5. The clubs operate on a non-profit making mutual basis whereby the premium
     paid by the Membership in relation to any one year should be sufficient to
     meet all the claims, reinsurance and administrative expenses of the Class or
     Classes in which the member is entered with the Club for that year. The Board
     sets the premium level (or “calls”) on the members after taking advice from
     the Manager and has the right to call for further funds from its members
     during the course of a year to fulfil the obligations of the club. In accordance
     with the Articles of each Party, if there is a surplus in the amount collected
     through calls, then at the absolute discretion of the Board a return may be
     made to the Membership or the surplus transferred to reserves to meet capital
     requirements and/or losses on other years.

6.6. I have confirmed with senior staff of the Manager, some of whom are board
     members of the Parties, that the process for estimating the level of calls and
     the advice which the Manager offers the boards of the Parties in respect of
     calls and/or distribution of surpluses for the Classes post –Transfer will not
     differ in any material way from the position pre- transfer. I am satisfied that
     this is the case based on the fact that

     -   the general administration of the Business in terms of reserve estimation,
         claims handling, member administration and IT infrastructure will remain
         in place post- transfer, and that
     -   representation by members in the Classes will also be substantially
         preserved post-transfer.

6.7. The balance sheet of a Club purely concerned in insurance will be similar to
     that of an insurance company with technical assets, technical reserves and
     debtors and creditors associated with the insurance. The free capital within the
     Club is represented by general reserves and corresponds to the capital and
     surplus of an insurance company

6.8. Under the Rules, Byelaws and Articles of the Parties any member to which
     variable calls apply has an unlimited liability to respond to calls which are
     levied by the Board. In addition the International Group (para 6.48 ) clubs all
     have an agreed common rule that provides for an extra levy to be raised
     against all of their members (an ‘overspill call’) up to a maximum figure
     (calculated according to a formula based on member vessel tonnage) to
     provide funds for a very large claim, one that exceeds the reinsurance limit (an
     ‘overspill claim’).This provision has never been used. These arrangements
     will remain the same post- the proposed Transfer.

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 6.9. The membership may change. The Parties operate a three year underwriting
      account and a year is normally closed three years from inception, after which
      no further calls for that year can be made. Until a year is closed the Board
      can levy supplementary calls on the members for that year. When a member
      leaves a Club, he will usually be asked either to pay a release call that relieves
      him of obligations to pay supplementary calls for the open years, or, if he
      prefers to remain liable for supplementary calls, to put up a bank guarantee to
      cover the potential amount of such calls.


 6.10. I asked the Manager to examine the postion of resigned members with respect
       to their election to pay release calls. I am advised that most members who
       have left have opted to retain their open year call liability. Having considered
       the position of members who have left or who may leave in the near future, I
       am of the opinion that they will not be affected by the proposed Scheme as
       the open years of the transferors will close in the normal way.


The Class System

 6.11. In common with many P&I clubs, the Parties are segregated into classes which
       reflect the different risk types (each a "Class" or together "Classes"). The
       principle is that those matters that relate specifically to a Class are dealt with
       on a Class basis, and matters that relate to the business as a whole are dealt
       with at the Club level.

 6.12. The existing Classes are:

          -   P&I Class covering:
                     •   Loss of life and injury to crew, stevedores, passengers and
                         other third parties
                     •   Physical damage caused to docks, fixed or floating objects
                     •   Collision damage caused to other ships
                     •   Pollution
                     •   Cargo loss or damage
                     •   Other minor liability risks

          -   Defence Class provides:
                     •   an indemnity in respect of authorised costs incurred by a
                         member in relation to pursuing or defending claims arising
                         in respect of the operation or chartering of a ship during the
                         period covered by the policy
    .

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           -   War risks Class
                       •   Providing compensation in the event of specified losses
                           caused by war, capture, seizure, arrest, restraint, detainment,
                           mines, torpedoes, bombs or other weapons of war

  6.13. There are separate Classes for P&I risks and for Defence risks, within
        Standard Bermuda and Standard Europe (this is also the case for Standard
        Asia, which is not directly involved in the Scheme).

  6.14. The Classes are managed in such a way that the risks in the same Class from
        different Standard entities may be aggregated for certain purposes, such as
        structuring reinsurance programs, subject to the approval of the Boards of
        each of the Standard entities concerned.

  6.15. In my analysis of the position of policyholders pre and post transfer in section
        9 I have focused on the legal entities - the Parties- rather than Classes. Under
        the rules of the Parties it is the Board of each Party who has responsibility for
        the Classes within it and for determining the calls on the members of each
        class or the distribution of surpluses. For practical reasons there are a number
        of activities conducted at Class level under the overall authority of the Board,
        e.g. it is the practice for reinsurance to be arranged at Class level and the
        setting of technical provisions is handled at a Class level. Financial statements
        are also maintained at a Class level. The Manager performs an apportionment
        of the financial data for the legal entity (Party) when these class financial
        statements are prepared. Class assets are segregated by being held in separately
        designated accounts. The financial assets representing the interests of the
        members of all Classes are centrally managed but are accounted for at the level
        of the individual Classes within the Parties.However these activities are
        conducted within the over-riding authority of the Board and there is no formal
        authority at Class level. I am advised by the Manager that the members of
        some of the classes, post transfer, may be represented by their own
        committees but it should be stressed that these committees will be advisory
        and while having certain responsibilities delegated to them, will be subject
        always to the control of the Board, and will have none of the Board’s formal
        powers in relation to the matters referred to above delegated to them and I am
        therefore satisfied that the primary analysis of the position of policyholders
        pre and post transfer should be conducted at the entity (Party) level.


  6.16. FSA Regulatory returns are prepared on a solo entity basis and the statutory
        financial statements are prepared on both a solo entity and, in the case of SB,
        a consolidated basis.

  6.17. Members may be in one or more Classes, e.g. a member may have both P&I
        and Defence cover 1. In addition, the members of one Class may reinsure

1 All members of the Defence Class are also members of the P&I Class. Most members of SW which

will become a class within SE are also members of the P&I Class but many members of Standard
Clubs have only P&I cover and are not also members of the Defence Class or SW

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     another. It has been the case in the past that Standard Bermuda P&I Class has
     reinsured the SB and SE Defence Class (and the Standard Asia Defence Class);
     this was due to the relatively small size of the Defence Class and the volatility
     of its claims, and served to ensure that the Defence Class is always able to
     meet claims in its own right. This inter-Class reinsurance is now provided by
     Standard Re in place of Standard Bermuda. In addition, reinsurance provided
     by the SB P&I Class of other Clubs' Defence Class for prior years has been
     commuted.

6.18. I have asked senior staff of CTC to explain the Class structure following the
      proposed Transfer and CTC has confirmed that the Class system will be
      maintained as follows :
           -    The P&I and Defence Classes will remain as they are within SE and
                will assume the P&I and Defence business of SB.
           -    The current SL and War Risks businesses will become separate
                Classes called London and War Risks Classes within Standard
                Europe.
           -    The reinsurance by the Standard Re P&I Class of the Defence Class
                is to continue as at present
           -    The current reinsurance by Standard Bermuda of Standard London is
                to be replicated into the new structure with Standard Europe P&I
                Class assuming the liabilities under this reinsurance and continuing
                to reinsure the SL Class.
           -    The Classes will continue to have Class committees to review the
                affairs of each Class and those committees will have specified
                responsibilities that relate to those matters that do not need to be
                reserved to the board but that can be delegated to Class committees

6.19. Some changes to the Articles of Association of SE and the Class Rules will be
      made to reflect the creation of the two new Classes in addition to the existing
      P&I and Defence Classes.

6.20. As currently, in the event of an insolvency all assets of the company will be
      aggregated for the benefit of all creditors, and regulatory returns will continue
      to be made on a company basis.

6.21. The assets of each Class within each Party (which include its reinsurance
      assets described further below) are “fungible” in the sense that they can all be
      made available to meet policy holder claims or other financial obligations of
      the company upon its dissolution or insolvency, including covering the
      obligations of members who default on the requirement to meet a call.

6.22. As discussed above, the Scheme involves SE being structured in such a way
      that it contains a number of Classes which represent the continuation of the
      Classes within the transferor Clubs.

6.23. Through the new Class structure the individual economic interests of the
      members of the transferor clubs will be preserved and segregated from the


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     interests of other members while they will enjoy the benefits of membership
     of a larger entity. For example if the loss experience of SL were to have been
     very good for a number of years this would have been reflected in lower calls
     and reduced reinsurance costs. This would still happen in the new
     environment where the members now become the SL Class within SE and
     their calls will be assessed without regard to the loss experience of the other
     Classes. However as members of SE the previous members of SL do face the
     possibility that, in extremis, the assets representing their interests might be
     used to deal with insolvency of the Club.

6.24. The proposed structure of SE post transfer and the addition of two new
      Classes has been designed to ensure the preservation of fairness between
      members of the transferring Clubs post transfer in terms of protecting their
      economic interests but I do not consider the division into Classes to be
      essential from the point of view of policyholders as their ultimate protection
      arises from the overall assets of SE and the support of the Group. Whether or
      not the segregated Class structure within SE is implemented and maintained
      therefore would not be significant in forming my opinion.

6.25. Based on my assessment of the Class structure before and after the Transfer, I
      do not consider there to be any material impact to the Members of the
      transferring Clubs who will become members of Classes within Standard
      Europe.




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 - Overall scale of the transfer and relative size of the Parties by Class

6.26. The table below sets out, at a high level, the relative size of each of the parties
      and the business Classes written by each as at 20 th February 2011.
      Gross Premium (USD 000's)
                                               P&I       Defence    War      Total
      Standard Bermuda                       122,550       5,602       0   128,152
      Standard Europe                         98,824       5,857       0   104,681
      Standard London                         14,302           0       0    14,302
      Standard War                                 0           0   1,672     1,672

      Gross claims reserves (USD 000's)
                                               P&I       Defence    War      Total
      Standard Bermuda                       470,656       9,011      0    479,667
      Standard Europe                         99,410      16,810      0    116,220
      Standard London                         19,897           0      0     19,897
      Standard War                                 0           0      0          0

      Number of mutual members
                                               P&I       Defence    War      Total
      Standard Bermuda                          190           81      0       271
      Standard Europe                            93           57      0       150
      Standard London                           614            0      0       614
      Standard War                                0            0      8         8



6.27. The Table below illustrates the relative composition of the Transfer by
     reference to Party and Class of business. P&I is the dominant Class; Standard
     Bermuda and Standard Europe between them represent the substantial
     majority of the overall portfolio.
                                    All Classes
                                    % Premium       % Reserves
       Standard Bermuda                    51.5%         77.9%
       Standard Europe                     42.1%         18.9%
       Standard London                       5.7%         3.2%
       Standard War                          0.7%         0.0%
       Total                             100.0%        100.0%

       P&I                                 94.7%
       Defence                              4.6%
       War                                  0.7%
       Total                              100.0%




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  - Pre-transfer Group structure

6.28. The Standard Group consists of the entities set out in Appendix 3. The
      schematic in Appendix 3 identifies a number of Standard Group companies
      which are unaffected by the proposed Transfer and also itemises the inter-
      company shareholdings.

6.29. For the purposes of clarity with respect to the scope of my opinion I have
      reproduced below 2 schematic diagrams which illustrate the pre- and post-
      Transfer structure :

Chart 1 – Pre Transfer structure of the Parties




Chart 2 – Post Transfer structure of the Parties




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     6.30. Standard & Poor’s provide security ratings for the Parties, other than Standard
           War. The ratings are stable and have not changed in the last 4 years :
                     o Standard London - “A-”
                     o Standard Bermuda - “A”
                     o Standard Europe - “A”

     6.31. Standard & Poor’s ratings are based on Standard Bermuda on a consolidated
           basis and the group rating is applied to each of the subsidiaries, including
           Standard Asia (also “A”), with an adjustment for Standard London in view of
           its relatively small size.

     6.32. The proposed Transfer is not expected to affect the Standard & Poor’s rating.
           However it is likely that as a result of Solvency II 2, a rating will be sought for
           Standard Re, which is not currently the case.




2   The forthcoming risk based capital system of regulatory capital determination across Europe

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 - Brief background of the Parties

 Standard London
6.33. Standard London is a company limited by guarantee and incorporated under
      the laws of England and Wales under registered number 20758 and with its
      registered office at Standard House, 12-13 Essex Street, London, WC2R 3AA.
      The company was incorporated on 8 February 1885 and its name was changed
      from The Standard Steamship Owners Protection and Indemnity Association
      Limited on 13 February 1998.

6.34. The company is authorised by the FSA to effect and carry on various Classes
      of insurance. It has no activities other than insurance.

6.35. When Standard Bermuda was founded, the majority of Standard London's
      members, particularly those involved in international ocean-going shipping,
      transferred to Standard Bermuda. The club has since developed into a
      specialist insurer of small vessels principally trading in and along Europe's
      inland waterways, ports and coasts.

6.36. The coverage provided and the basis of coverage and premiums are, in most
      cases, identical to that in the principal club, Standard Bermuda, except that
      Standard London provides only P&I Class insurance, not Defence Class
      insurance.

 Standard Bermuda
6.37. Standard Bermuda is the leading member of the Standard Group. It wholly
      owns the shares in Standard Re, has a 20% shareholding in Standard Asia (the
      remaining 80% being owned by Standard Re) and controls Standard Europe
      through voting rights. It also owns property assets, Hydra (see paragraph
      6.45) and other insurance interests.

6.38. Standard Bermuda was founded in Bermuda in 1970 and operates on a mutual
      basis.

6.39. Standard Bermuda had only a P&I Class until 1995. Until that year, members
      who also wanted Defence Class cover bought it from the Standard Defence
      Club (now Standard Europe). In 1995, a new Defence Class was established
      in Standard Bermuda so that members could buy P&I and Defence Class
      cover from Standard Bermuda, which continues to be the case.

6.40. Standard Bermuda is authorised by the FSA in respect of its insurance
      business (which is wholly written in London), and by the Bermuda Monetary
      Authority as a Class 2 reinsurer.




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 Standard War Risks
6.41. Standard War Risks was established in England in 1913 as a mutual association
      to provide hull and P&I war risk cover principally to British flag or
      beneficially owned ships. It has continued without change since that time.

6.42. There is a high degree of commonality between members of Standard War and
      the other Parties :

          -     Seven out of the eight members of the SWRC also have entries for
                the same ships for P&I risks in the Standard Bermuda or Standard
                Europe clubs.
          -      SW reinsures the Canadian Shipowners Mutual War Risks
                Association, some of whom are also members of Standard
                Bermuda and who therefore have ships entered in Standard
                Bermuda for P&I risks


 Standard Europe
6.43. Standard Europe is a company limited by guarantee and incorporated under
      the laws of England and Wales under registration number 17864 and with its
      registered office at Standard House, 12-13 Essex Street, London, WC2R 3AA.
      The company was incorporated on 8 February 1883 and its name was changed
      from The Standard Ship-Owners Mutual Freight Demurrage and Defence
      Association on 7 February 1995. Standard Europe is ultimately controlled by
      Standard Bermuda by virtue of voting rights attributable to Standard Bermuda.

6.44. The company is authorised by the FSA to effect and carry on various Classes
      of insurance. I am aware that at the time of writing there is an apparent error
      in the FSA Register which shows in respect of three Classes of insurance
      business that SE has only authority to effect insurance but does not show its
      authority to carry on such insurance. I have been informed that an application
      has been made to the FSA to rectify this error and I understand that the
      application has been favourably received by the FSA and that the FSA register
      will shortly be amended to reflect the position. In forming my opinion I am
      assuming that this matter is resolved and not outstanding at the time of
      transfer.

Other Companies in the Standard Group
6.45. The main insurance entities which are part of the Standard Group are
      identified in the structure chart at Appendix 3. Those which are not direct
      parties to the Transfer, but which I have considered in the context of
      reviewing the potential impact of the proposed Transfer are :
      6.45.1. Standard Steamship Owners’ Protection and Indemnity Association
           (Asia) Limited (“Standard Asia” or “SA”) ,
                o Standard Asia is a P&I insurer serving Asian/Pacific members. It
                     is a limited liability company which is incorporated in Singapore
                     and authorised by the Singapore monetary authority. Although it
                     is not formed as a mutual association it operates on mutual



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           principles. Its shares are owned 20% by SB and 80% by Standard
           Re which is itself owned 100% by SB
         o Although Standard Asia in not formed as a mutual association its
           policyholders are members of SB and the policyholders of
           Standard Asia benefit from the mutual arrangements within SB
         o Standard Asia’s Classes are managed on a unified basis with the
           corresponding Classes of SB and SE and they will continue to be
           managed on a unified basis with the corresponding Classes within
           Standard Europe after the Transfer. Although SA will have a
           financial interest in the overall result for the Classes and the
           reinsurances protecting them, their interest will be fairly
           determined in the same way as it has been in the past and in my
           opinion the effect of these arrangements will not be materially
           different as far as the insured members of the Parties and/or
           their reinsurers are concerned.

6.45.2. Standard Reinsurance (Bermuda) Ltd “Standard Re”
          o Standard Re is authorised as a Class 2 reinsurer by the Bermuda
             Monetary Authority. Its sole activity is and has been the
             provision of reinsurance to Standard Group members.

6.45.3. Hydra
         o is a Bermudian segregated cell company established on behalf of
            the member clubs in the IG, each of which owns a separate cell
            in Hydra, which reinsures that Club in respect of part of its pool
            obligations. The members of the Standard Group are reinsured
            through one cell in Hydra under these arrangements. Hydra has
            been in operation since 2004 and the proposed Transfer has no
            effect on its operation, I describe the role of Hydra within the
            overall reinsurance arrangements in section 6.52.




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-    Governance and operational management of the Parties

6.46. The Parties are each governed and directed by their Boards which are
      principally composed of shipowner members together with Manager
      representatives. The Boards of the Transferors and the Transferee have each
      entered into management agreements with the Manager (CTC or its local
      affiliate). The management agreements between the Transferors and the
      Manager are all in similar form. The management services provided by the
      Manager are comprehensive and include all aspects of underwriting, arranging
      the reinsurances, settling claims, managing funds, preparing accounts,
      representing the club in discussions with the IG (and the CGWRC) and
      industry organisations and dealing with all matters delegated to them by the
      Board.

6.47. The Manager will continue to manage the business of Standard Europe after
      the Transfer, which will then include the general insurance business of the
      Transferors. I am satisfied that after the Transfer there will be no practical
      change in the manner in which the members, policyholders, reinsurers and
      other interested parties deal with Standard Europe compared with how they
      dealt with the transferors previously. Their day to day dealings will continue
      to be with the Manager as before.




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        - Risk Pooling Agreements – IG and CGWRC

 6.48. The Parties, other than Standard War, are members of the IG, which consists of
       13 clubs (or groups of clubs).

 6.49. The IG operates the International Group Agreement (‘IGA’), which is an
       agreement that governs some of the relationships between Clubs, including the
       basis of movements of ships between different clubs.

 6.50. Standard Bermuda, Standard Europe, Standard London and Standard Asia are all
       signatories to the IGA. Currently Standard Bermuda is designated as the
       principal member of the IG in respect of the Standard Group, and Standard
       Europe and Standard London are associate members. It is not envisaged that
       there will be any change in relation to the IGA post-reorganisation 3.


The IG Pooling Agreement (“Pool”)
 6.51. The IG has established a risk pooling mechanism whereby the Pool provides a
       claims-sharing arrangement under which each club currently bears a retention
       (excess of the shipowner member’s deductible) for each claim, and the excess of
       any claim is shared between all the 13 clubs in the Pool, according to a formula
       and rules set out in the Pooling Agreement. For extremely large individual
       claims, the reinsurance arrangements mean that the proportion of any claims
       over the specified threshold is transferred to external commercial reinsurance
       markets.

 6.52. The IG has established, on behalf of all Pool clubs, a segregated cell captive
       company called Hydra. Each Hydra cell is owned by a separate Pool club and
       reinsures that club in respect of some of its pool obligations. Hydra, on behalf
       of all the cells, purchases external reinsurance in respect of all the Hydra captive
       cells. The arrangements with respect to Hydra are the same both pre- and post-
       Transfer and as such do not have a bearing on my opinion of the impact of the
       Transfer on the affected Parties.

 6.53. Standard Bermuda, Standard Europe and Standard London are all named as
       parties to the Pooling Agreement, but are treated as one entity for Pooling
       purposes. Standard Bermuda is currently designated as the principal club of the
       Standard Group and is jointly and severally liable for the Standard Group
       financial commitments to the Pool. Standard Asia participates in the IG by
       virtue of being named as a reinsured subsidiary of Standard Bermuda in
       reinsurances of Pool business arranged for Standard Bermuda.

 6.54. The Standard clubs have one vote only in the Pool, exercisable by Standard
       Bermuda.




 3   Except that Standard London will no longer be a signatory.

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 6.55. Following the Transfer, it is intended that Standard Bermuda will remain the
       principal Standard club for Pooling purposes and will have the Standard Group
       vote, and Standard Europe will continue to benefit from the IG arrangement as
       at present. Standard London will no longer be a signatory to the Pool. I am
       advised by senior staff of CTC that only minor administrative changes are
       expected as a result of the Transfer being approved (see also para 6.60).


The Combined Group of War Risks Associations (CGWRC)
6.56. The CGWRC is a similar organisation to the IG except that its members are
      Clubs writing War Risk cover for their members. The membership is much
      smaller and comprises only three Clubs writing war risks. The CGWRC has a
      pooling agreement which operates along similar lines to the IG Pooling
      Agreement and the CGWRC also arranges reinsurance of pooled risks for its
      members.

6.57. Standard War Risks is a member of the CGWRC and its membership will pass to
      SE. I have reviewed the reinsurance cover provided in favour of Standard War
      Risks and note that the portfolio is 100% reinsured, with nominal residual
      insurance liabilities. I have confirmed with the Manager that it is the intention to
      maintain reinsurance at this level post – Transfer.


Significance of the International Pooling Arrangements on my Opinion
6.58. The IG and CGWRC provide potential assets for the Parties in the form of
      receivables under the pooling arrangement and under the third party reinsurances
      which are negotiated by IG and CGWRC. Conversely, each company within the
      Standard Group, and, ultimately and indirectly, each individual member, is liable
      in respect of their pooling obligations and the cost of the reinsurance.

6.59. The Standard Group (including Standard Asia) has been represented on the IG by
      a single member, SB, which has the overall obligation as a member of the IG and
      it is intended that this will continue to be the case.

6.60. While acknowledging the significance of membership of the IG and CGWRC
      both as a source of additional protection and also in generating further
      exposures; as Independent Expert I am concerned with the impact of any
      changes that occur as a result of the Scheme. I am satisfied that there will be no
      impact attributable to the Scheme provided the IG and the CGWRC treat the
      Standard Group exactly as they did before. I have discussed the basis of Pooling
      arrangement cost apportionment with CTC, and I have been advised by CTC
      that the basis of cost allocation of the combined Group is identical to the sum
      of the Parties on an individual basis pre- Transfer. The basic reason for this is
      that the Standard Group has always been aggregated into a single entity for
      pooling purposes and this will continue to be the case post transfer. In any event
      CTC have advised the members of both IG and CGWRC of the proposed
      Transfer and none of them has indicated that they have any objection to the
      Transfer. I have confirmed with senior managers of CTC that any modification
      of the terms of the Pooling arrangements arising out of the Transfer are
      concerned only with reflecting the revised structure and will not be material. I

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         have been informed by senior members of staff at CTC that confirmation is
         being sought from all other members of the IG that the Scheme will not affect
         the aggregate costs allocated to Standard Group members. I understand further
         witness evidence will be filed at Court dealing further with this aspect.

6.61. Policy holders with claims currently notified will, where the claim falls into the
     IG pooling arrangements, continue to have the protection afforded by these
     arrangements and policyholders who advise of claims in the future will benefit
     from such arrangements as are in place. It may well be that the IG or CGWRC
     pooling arrangements in future become a source of high levels of pooling
     liabilities for the Standard Group or the third party reinsurance cannot be
     negotiated on the same terms, but I do not consider these possibilities as being
     material considerations in respect of my opinion of the proposed Transfer as
     these potential outcomes may occur in any event.

6.62. The Pooling arrangements create a potential modification to the risk profiles of
      the Parties in the event of an insolvency of SE for example :

   -      SW, by becoming a Class within SE is potentially exposed to liabilities of the
          members of other Classes in respect of obligations to third parties including
          obligations arising under membership of the IG Pool
   -      Similarly the other Parties become more directly exposed to claims arising out
          of the War Class

   These exposures arise only in the event of an insolvency of SE and as SE is
   operated on a mutual basis and may levy additional calls on the members of its
   respective Classes to meet exceptional liabilities, it is an extremely remote
   possibility that SE could become insolvent. I consider the effect of the
   modification in the risk profile to be immaterial in the context of my opinion.


The Standard Re Quota Share

6.63.       Both Standard Europe and Standard Bermuda have a 90% Quota Share
        arrangement with Standard Re, Bermuda.

6.64.       Under this reinsurance 90% of the liabilities arising from policies (excluding
        those relating to US source business) written by Standard Bermuda and Standard
        Europe including obligations they have assumed under the IG pooling
        arrangement are reinsured on a quota share basis by Standard Re. As part of this
        arrangement, 90% of reinsurance recoveries received from the third party
        reinsurances will inure to the benefit of Standard Re. This will continue post
        transfer and I am satisfied that under the terms of the Scheme all coverage will
        transfer to SE with no loss of value.




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Standard Bermuda Reinsurance of SL

6.65.       SL's retention under the pooling arrangement with the IG has been
        substantially reinsured by SB with additional commercial reinsurance
        participation. Under the Scheme the commercial components will be renewed and
        the reinsurance of SL by SB will be transferred to the SE P&I Class with no
        adverse implications to the affected parties.

Other Reinsurances

6.66.       There are a number of other reinsurances in existence with commercial
        reinsurers both as part of the Pooling arrangements, as a supplement to them and
        covering non-poolable risks. I have asked CTC and its legal advisors to
        consider whether the proposed Transfer could give rise to any impairment of the
        value the external reinsurance arrangements upon the Transfer becoming
        effective. 4[1] . I am advised by CTC and its legal advisors that all the reinsurances
        are governed by English law and that SB,SL,SE and SA are all named in
        reinsurances which affect any of those parties. Accordingly, a transfer between
        any of these reinsureds is extremely unlikely to have any adverse consequences
        because the transferee is already a reinsured entity. With regard to SW, I am also
        advised that all the reinsurances are governed by English law and the contracts do
        not contain any provision affecting cover in the event of a transfer. Accordingly,
        I am satisfied that there is no impediment to the transfer of the reinsurances and I
        am satisfied that these assets can be transferred to SE with no loss of
        value. Furthermore, I can see no reason why the Transfer should, in itself, make
        renewal more difficult or give rise to any loss of continuity of cover.




        4[1] e.g. the contract terms may specifically preclude a transfer under FSMA Part VII or may carry

        a penalty. Clyde & Co LLP have explained to me that, in any event, any provision prohibiting a
        transfer would be of no effect as a result of the provisions of The FSMA (Amendments to Part
        7) Regulations 2008, which I am informed are intended to make it clear that the Court has power
        to transfer contracts notwithstanding provisions therein prohibiting transfer or purporting to
        give rise to rights to terminate the contract upon transfer.

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- The Standard Bermuda Guarantee and Financial support to the Parties.

6.67.       Following the Transfer, Standard Bermuda will continue in existence as a
        Class 2 authorised reinsurer but has no current intention of effecting insurance or
        reinsurance business. Its insurance activities and related technical assets will
        transfer to SE leaving its non-technical assets and shareholdings in place as it
        assumes a role as a non-trading holding company.

6.68.       SB provides a guarantee to SE to maintain its financial assets at an appropriate
        level from the point of view of rating agencies, policyholders and other interested
        parties and this will continue to be the case when the membership of SE is
        increased post Transfer by the addition of the members of SB,SL and SW. I have
        sought confirmation from CTC’s legal advisors as to whether there will be any
        change in the guarantee and have been advised that the Transfer Scheme provides
        for the existing guarantee to be construed such that references to members of SE
        shall be read so as to include transferring members. SB does not intend to issue a
        new guarantee. I understand that this construction will take effect as a result of
        the terms of the Order to be made by the Court sanctioning the Scheme, which I
        have seen in draft. For this reason, I am satisfied that members transferring into
        SE will be able to enforce their rights in reliance upon this construction of the
        guarantee, as is confirmed by the independent legal opinion referred to in
        paragraph 6.69 below.

6.69.       A feature of the capital management across the Group has been the transfer of
        surplus from SB to SE when the need has arisen. I have requested evidence from
        CTC of the practical implementation of the guarantee and been provided with a
        summary of the circumstances under which capital transfers took place pursuant
        to the guarantee being activated. I am therefore satisfied that the guarantee is an
        active component of capital management across the Standard Group and that it
        has proved effective in the past. Legal advisors to the Scheme have obtained
        separate counsel’s opinion on the legal enforceability of the guarantee, of which I
        have reviewed a copy; the opinion concludes that the guarantee is legally
        enforceable both pre- and post- transfer.


6.70.       Following the proposed Transfer, SB will continue to control SE. SB will have
        substantial assets in addition to interests in the Parties including its 100%
        ownership of Standard Re, Hydra and properties (Standard Re will continue to
        hold substantial assets in its capacity as the 90% quota share reinsurer of SE). SB
        will no longer have a relationship with the FSA and its holdings in Standard Re,
        Hydra etc. will no longer form part of an FSA return. It will be solely regulated in
        Bermuda. I have to take into account the possibility that the future value of this
        guarantee could be diminished if the members chose to distribute its surplus
        capital to themselves. However all the members of SB will also be members of SE
        (or SA) and as shipowners they have an interest in maintaining the economic
        strength of their P&I Club. It has always been the case that the potential exists to
        reduce the net assets of SB to the benefit of its members (e.g. by limiting calls)
        provided that the necessary margin over solvency requirements is maintained,


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        therefore in my opinion there is no diminution in the value of the guarantee
        caused by the Scheme.

6.71.       The financial support of SB is also important in the day to day provision of
        liquidity. The members (as policyholders) require rapid response to claims in
        order to continue trading following an incident through the provision of
        guarantee letters to claimants well before the actual liability of the policyholder
        has been established. Such guarantee letters are normally provided by the insuring
        club and occasionally by SB; the proposed Transfer will not affect the provision
        of such guarantee letters and as noted in paragraph 9.1.5, I have considered the
        overall provision of liquid funds and am satisfied that the Scheme will not cause
        any change to the availability of cash for any business purpose.




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-   Summary of the Chain of Security


6.72. From the point of view of the policyholder of one of the Parties, the chain
     of security is as follows. I have characterised the process as a number of
     “steps”

6.73. Step 1 - the assets of the Class within which the policyholder is entered with
     a Club

6.74. Step 2 - the Class to which the policyholder as a member is entered has
     available various reinsurances and some inter-Class reinsurances may also be
     in place. If a specific claim is sufficiently large and of a type that falls within
     the coverage offered by the International Groups, then the pooling
     arrangements, including reinsurance, of the IG (or CGWRC in the case of a
     War Risk) become available to meet those losses.

6.75. Step 3 within its Rules the Board of the Club, if necessary, can make further
     calls on the Members of the Class to meet claims; alternatively, or in addition
     to which, the club may be in a position to call on the support of SB. As far as
     the existing members of SE are concerned, this is explicit under the terms of
     the SB guarantee. For SL and SW, backing from SB would presently only arise
     for reputational reasons but the backing of SB will become explicit when the
     members transfer to SE. Post – Transfer all the members of SE will have the
     benefit of the resources of the Standard Group through the SB guarantee in
     relation to which they will all be beneficiaries.

6.76. Step 4 - in the event of an insolvency of the company (i.e. the Club within
     which the policyholder, as a member is entered), then all the assets of the
     company can be made available to meet claims.

6.77.        I set out below the interaction of the different aspects of the chain of
        security to each of the Parties pre- and post –Transfer

        -    SE - all Steps are the same subject to the minor changes in interclass
             reinsurance described in 6.17

        -    SB - steps 1&2 are the same subject to the minor changes in interclass
             reinsurance described in 6.17. Step 3 differs in the sense that after their
             transfer to SE the access to the residual assets of SB is via the SB
             guarantee of SE. For Step 4 the company of which they are members is
             now SE not SB; however because of the 90% quota share of SE with
             Standard Re it is unlikely that SE would become insolvent in isolation
             and the entire group including SE would also be insolvent.

        -    SW - steps 1 & 2 are the same as SW becomes a class within SE. Step 3
             differs in the sense that support from SB becomes explicit and not



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             discretionary. In the case of Step 4 the company of which they are
             members is now SE, not the much smaller and less diverse SW.

        -    SL - steps 1 & 2 are the same as SL becomes a class within SE subject to
             the minor changes in interclass reinsurance described in 6.18. As with
             SW, Step 3 differs in the sense that support from SB becomes explicit
             and not discretionary. In the case of Step 4 the company of which they
             are members is now SE, not the much smaller and less diverse SL.


6.78.        I have considered the position of each Class of policyholder and, in my
        opinion, there is no Class of policyholder for whom the ultimate protection
        under this chain of security is materially impaired by the proposed Transfer. I
        have quantified the relative scale of available surplus funds in section 9.


-   Nature of the Scheme

6.79. The effect of the Scheme is that rights and obligations under policies issued by
      SW, SL and SB will be transferred without alteration to SE. Each
      policyholder’s rights and obligations will remain unchanged, but will, following
      the transfer, be exercisable against or owed to SE. Any premiums payable in
      respect of the Business will in future be payable to SE.

6.80. The benefit of all outwards reinsurances protecting the policies will be
      transferred to SE together with all of SW’s, SL’s and SB’s technical reserves
      and the corresponding assets held in respect of those reserves. In addition the
      free capital of SW and SL together with the general reserves of SB which are
      associated with its transferring business and the corresponding assets are to be
      transferred (para 9.13).

6.81. For most operational purposes, including finance and accounting, claims
      handling and claims reserving, there is little distinction between the Parties.
      The day to day operations of the business are independent of, and unaffected
      by, the Scheme. I have discussed the claims handling, general administration
      and business processing of the Business with senior managers of CTC and I
      am satisfied that there will be no significant change to the administration of
      the business as a result of the Scheme.

6.82. Standard Asia does not form part of this Scheme but having considered its
      position, I am satisfied that it is not adversely affected by the proposed
      Transfer.

6.83. The members of the Parties have previously been advised by their Boards that
      the structure of what is referred to as the “Standard family” would need to be
      reviewed in the light of Solvency 2 and other changes in order that the
      companies continue to be cost effective and capital efficient. The Boards of
      the Parties advised by the Manager have determined that the Part VII transfer
      process is the best way to achieve the required restructuring and in forming

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      my opinion I have not been presented with alternatives to the Part VII
      transfer mechanism and accordingly I have not considered any.

7. Information used in preparing this report

 7.1. This is itemised in Appendix 2

8. Reliance placed on the data provided and on the judgment of others

 8.1. I have relied upon the data itemised in Appendix 2 to be accurate. I have
      applied limited cross-checks to certain items in the financial statements
      provided to me and found the data provided to be consistent with these
      checks. I have relied in particular upon the audited accounts of the Parties,
      which were unqualified. I have also relied upon the internal reserve
      memoranda and the internal ICA analyses and reports.

 8.2. I have had access to written information and verbal explanation from senior
      managers within CTC with responsibility for administering SB, SL, SW and SE
      and have been provided with further background information, as required.
      The majority of the senior members of staff upon whom I have relied have
      professional qualifications across a range of disciplines; I explained the role of
      the Independent Expert to the senior personnel upon commencement of my
      work and ensured that the people upon whom I have relied have clearly
      understood my responsibilities to the Court, I am therefore satisfied that it is
      reasonable to have relied upon the senior personnel to provide the
      information which I sought.

 8.3. I have discussed with the senior manager of CTC with relevant responsibility,
      the control processes relating to data quality, reconciliation to financial
      ledgers, peer review and external review and benchmark testing. I am satisfied
      that these processes are comprehensive and of a high standard but I have not
      independently performed a data or process audit.

 8.4. All of my work has been conducted on the basis of information provided as at
      February 2011 unless stated otherwise. I have been advised by CTC that there
      have not been any material developments since that date which are likely to
      influence the opinion expressed in this report.

 8.5. Movements in assets values, claim payments and technical provisions occur
      almost continuously and in view of this I will produce an update to this report
      shortly prior to the date of the Scheme sanction hearing in order to establish
      whether any material factors have emerged in the intervening period which
      cause a revision to the opinion expressed in this report.




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9. The analytical approach taken and the likely effect of the scheme on the
   policyholders of the transferor and transferees

      My analysis and observations fall under the following headings:

          •   Valuation basis of the transaction
                 o High level description of the internal claim reserve estimation
                     process
                 o Investigations and commentary on the internal reserving
                     process
          •   Administration
          •   Policyholder security
          •   Other considerations


 9.1. Valuation basis of the transaction

  9.1.1.       Assets equal in value to the technical provisions relating to the
       transferring business will transfer to SE. The technical provisions are made of
       the following components:

          •   Gross notified outstanding claims and Incurred But Not Reported
              claims (“IBNR”), less the associated reinsurance recoverable with
              allowance for bad debts. These provisions are established on a best
              estimate basis and are carried on an undiscounted basis, making no
              allowance for the future investment income in respect of the matching
              assets. There is no provision for unexpired risks as all policies are co-
              terminous with the accounting year.

          •   Explicit provisions for future claim handling costs are not provided as
              part of the technical provisions in the statutory financial statements on
              the basis that investment income provides an appropriate offset, this is
              the established, practice for each of the Parties. I have reviewed the
              financial statements and am satisfied that this is not an unreasonable
              position since in general the level of investment income has exceeded
              the level of expenses by a considerable margin. However for capital
              modelling purposes (the ICA), future expenses are fully provided for
              and modelled. Under Solvency II, claims handling provisions will
              become a formally identified technical provision and it will be
              necessary to explicitly quantify such provisions in the financial
              statements. The same practice is adopted by the each of the clubs with
              respect to establishing provisions for future claims handling costs and
              there will be no difference pre- or post- transfer. The Scheme is likely
              to lead to a relatively lower cost base since there will be reduced
              overhead expenses post – Transfer on the current scale of operation as
              a result of the single operating platform (SE) in London.


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9.1.2.      All the outstanding insurance and reinsurance liabilities and title to all
          reinsurance due, or which may become due, will also transfer to SE.

9.1.3.      Assets corresponding to the free capital (known as general reserves) of
     SL and SW will also transfer to SE; in addition, the general reserves of SB
     which are associated with the transferring Business are similarly to be
     transferred. I have confirmed with senior managers of CTC that all assets are
     valued at market value. The only exception is that investment in subsidiaries
     of SB is valued at cost in the SB and Standard Re individual financial
     statements.

9.1.4.      I have considered the basis of establishing technical provisions for
     SB,SL, SW and SE. I have not performed a full independent review of the
     technical provisions as I did not consider that this was necessary given the
     similarity of reserving process which is implemented across the Parties
     together with several levels of peer review and external validation. I held
     meetings with the senior staff with responsibility for estimating both the
     technical provisions and the delivery of other analytical support for the Parties
     - including the ICA capital model. My comments below set out the
     investigations that I have carried out and the conclusions which I have
     reached.

9.1.5.       Liquidity is important as the parties may need to provide substantial
     funds in order to settle clams or to meet other demands as may be required. I
     have discussed the liquidity of the investments and the banking arrangements
     with senior staff of CTC and am satisfied that this will not be impaired by the
     Scheme. The policy of maintaining a significant proportion of assets in readily
     realisable securities will continue. In addition the reinsurances (which will
     continue in force) provide for rapid settlement including, in particular,
     provisions as a member of the IG Pool for same day settlement of major
     claims (subject to appropriate prior notice). I have had explained to me, in
     detail, the process of claims settlement and cash funding in respect of losses
     arising out of a recent substantial claim – the MSC Chitra (a collision incident)
     at Mumbai in August 2010 where $80m has so far been paid and substantially
     recovered.




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High level description of the internal reserve estimation process

9.1.6.      The estimation of provisions for unpaid claims is performed at a Class
     level with an apportionment to legal entity based on the relative level of case
     reserves with adjustment in respect of localised distorting factors. The
     Classes of business considered are:

            Own P&I Claims
            Share of Other Pool Member Claims
            Standard London Claims
            Totalled as P&I Claims

            Defence Claims

9.1.7.       At the year end, no claims reserves were held in respect of War Claims
     since none was outstanding. However in the past, there have been claims at a
     modest level and reserve estimation is performed based on the particular
     circumstances. It should be noted that current and planned reinsurance
     arrangements for SW anticipate that the SW business is fully reinsured, and I
     have reviewed the appropriate reinsurance cover note in order to confirm that
     this is presently the case.

9.1.8.      The Reserves are set quarterly by a reserving committee consisting of
     executives of CTC which makes recommendations to the Boards of the Clubs
     based on their judgement with respect to specific circumstances and the result
     of applying a number of the standard claims projection techniques common
     within the Actuarial profession. Reserves in respect of claims arising from
     asbestos exposure are established as a separate analysis. The results of the
     various approaches and the final decision are fully documented and I have
     reviewed the commentary on the reserve analysis.



Investigations and commentary on the internal reserving process

9.1.9.     I requested and was provided with paid and incurred claims
     development statistics for the major lines of business and have reviewed the
     ICA submission document

9.1.10.     I am satisfied that the core data used to generate the claims reserves
     estimates is reasonable and I performed independent projections of sub-sets
     of the data provided, based on historical trends in paid and incurred claims
     and have satisfied myself that CTC’s in-house projections are reasonable. The
     projections which I have performed were carried out at a high level in order
     to establish a general view of reserving levels; I did not review the underlying
     data to the degree to which a formal actuarial reserve study would be carried
     out as this was not necessary, in my opinion, in view of the detailed analysis
     and control process performed in-house.


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        For claims excluding asbestos related liabilities:

        -     With respect to Standard Bermuda I have carried out high level
              projections of the major P&I Class portfolio (I did not examine SB’s
              claims in respect of pooled IG losses) and the Defence Class – together
              these represent in excess of 90% of case reserves, gross of reinsurance.
              The projection method used was a chain-ladder projection 5 approach
              applied to both gross paid and incurred claims. I obtained results which
              were consistent with those of the Manager.

        -     For the Standard London P&I Class I reviewed the development of gross
              P&I claims and obtained results consistent with those of the Manager,
              the data sample represented all claims in respect of 2002 and later
              underwriting years – the vast majority of the case reserves are
              represented in the data sample.

        -     The quantum of claims outstanding for SW is minimal and I did not
              consider that any further examination of the technical provisions was
              required.

        For asbestos related claims

  9.1.11. Asbestos liabilities fall under the P&I Class and is in respect of
       compensation claims for bodily injury suffered by individuals arising out of
       exposure to asbestos while working as seafarers (including engineers and
       engine room ratings), or as stevedores who were exposed through handling
       asbestos cargoes or cargoes contaminated with asbestos fibres.

  9.1.12. Bodily injury may take various forms, the most severe being
       mesothelioma, a lethal lung or abdominal cancer; there are also claims in
       respect of other forms of cancer and lesser lung injuries. The duration or
       “latency period” between exposure and manifestation of injury may be in the
       order of 40 years, which means that estimates of the reserves required to meet
       future claims are subject to considerable statistical uncertainty; in addition,
       changes in the legal treatment of compensation can also materially affect the
       final outcome. Strict industry controls over the use and transportation of
       asbestos were generally implemented in the 1970’s.

  9.1.13. Asbestos claims represent approximately 27% of the IBNR relating to SB’s
       P&I liabilities. Asbestos claims have been under detailed review for many
       years and have been subject to external peer review and fall under the scope
       of the annual audit. The approach taken in estimating appropriate levels of
       reserves is, in my opinion, consistent with general market practice and due
       consideration is given within the analysis to features specific to the largely
       marine nature of the exposures.

5 The chain ladder projection method is a ratio based method which assumes that claims in successive

development periods bear a constant proportionate relationship to one another, independently of the
accident or underwriting year.

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     9.1.14.      The stages in deriving the reserve estimate are :

          -     Claims notifications are collated on a calendar year basis and segmented
                by geographical territory and nature of disease.

          -     Claims values and counts are used to calculate an average cost per case,
                and the empirical data of the Parties is benchmarked, where possible, to
                published information. A particular reference source for average claim
                sizes and future claim notification patterns is the Institute of Actuaries
                Asbestos Working Party report, a widely cited reference document in this
                area.

          -     A statistical fit is performed on the past claim notification pattern in
                order to produce an estimated future notification pattern.

          -     Average costs, by disease and territory, are projected into the future, with
                inflationary allowances.

          -     By multiplying projected future claim counts with projected average
                claim costs in each of the segmentations, a base estimate of the required
                reserve is produced.

     9.1.15.    Separately from the analysis of counts and values, CTC have performed
          an exposure-based analysis by considering:

                  -    the number of vessels operating over the period from 1940 to 1980
                      (bracketing the peak exposure periods), and

                  -    the number of exposed seafarers, whilst making certain
                      assumptions with respect to their career work pattern

                The exposure based approach is used to consider the consistency of the
                pattern of the observed number of claims notifications relative to the
                theoretical exposure.

     9.1.16.      The base reserve estimate is then stress-tested by considering the effect
          of alternative scenarios for future claim counts and future average costs per
          case.

     9.1.17.      The reserves carried are not discounted for future investment income
          and carry an implicit margin in this regard. I have not performed a detailed
          analysis of future cash flows, but by way of illustration, if the average duration
          to settle claims is 10 years, then using a 2.46% 6 interest rate, the discounted
          value is 78% of the undiscounted value – in other words a margin of roughly
          25% of the nominal amount



6   UK Gilt 10 year redemption yield on 25 August 2011

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9.1.18.     Subject to the uncertainties associated with establishing reserve
     estimates for asbestos, I am satisfied that:

    -   The reserving methods used are appropriate

    -   The reserve estimates themselves are reasonable




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9.2. Policyholder security

 9.2.1.     Given that the administration of the Business is not affected by the
     Scheme, the fundamental determinant of policyholder security relates to the
     amount of surplus capital that is available to meet policyholder claims if such
     claims prove to be higher than is anticipated in the assumptions underlying
     the technical reserves carried on the books. For these purposes, I have
     performed certain quantitative tests of balance sheet surplus and in addition
     examined the process which is used in practice in monitoring and maintaining
     the continuing solvency of the Parties. I have made no allowance for the
     additional, contingent, asset represented by the Boards’ ability to make
     supplementary calls under their Rules. The quantitative tests that I have
     applied are:

                 − Balance sheet surplus on a statutory and regulatory accounting
                   basis
                 − Capital requirement as determined by Standard’s Individual
                   Capital Assessment ("ICA") model
                 − Capital requirement as determined using the Enhanced Capital
                   requirement (“ECR”) formula
                 − Individual Capital Guidance ("ICG") as specified by the FSA


 9.2.2.      Definition of terms:

                 − ICA
                 − ECR
                 − ICG

    ICA.
       − ICA is an examination of the principal risks faced by an insurance
         enterprise and is tailored specifically by each insurance business to
         reflect its particular features. The key financial measure produced by
         the ICA is an indication of the level of capital necessary to ensure the
         financial security of the insurance enterprise through 99.5% of
         statistically modeled outcomes. Typically, this is regarded as equivalent
         to Standard & Poor’s security rating of BBB- . A formal submission is
         made by the insurance enterprise to the FSA on a timetable prescribed
         by the FSA.

          − The ICA model output apportions the capital requirement into the
            major risk drivers common to all insurance businesses, namely
            underwriting risk, reserving risk, investment risk, counterparty risk
            (normally reflecting the risk of a default by reinsurers), operational risk
            and other risks arising through membership of a larger group of
            companies. The model is designed to inform company management

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       and the FSA of appropriate levels of capital commensurate with the
       risks inherent in the business.

   − CTC perform capital modelling using a now well-established software
     platform with related calibration and control processes and would
     normally submit their ICA model and results for the FSA's scrutiny on,
     approximately, a 3 yearly cycle.

ECR

   − Whilst ICA is specific to individual companies, a further test of
     regulatory capital is the Enhanced Capital Requirement ("ECR"), which
     is a risk-sensitive standard formula approach with specific industry
     factors applicable to various components of the insurers' regulatory
     returns

ICG
   − In performing their regulatory function, the FSA will review a company
     ICA submission in addition to other information and in many cases
     will form a different view to the company as to what is an appropriate
     level of capital in order to meet the regulatory objectives.
   − A mechanism by which the FSA informs insurance entities of the
     required level of capital is the ICG, which follows a detailed review of
     the formally submitted ICA model report and, usually, other regulatory
     inspections.
   − The ICG is expressed as a multiple of ECR, thus, whilst the company’s
     own formal submission to the FSA of its own-assessed capital
     requirement is on an approximate 3-yearly cycle, by expressing the ICG
     relative to ECR (which is an annual, or more frequent calculation and
     reflects the changing risk profile of the business), the relative margin of
     the theoretical calculation to the ECR is maintained at each year end
     provided that the underlying business itself does not change
     fundamentally.

9.2.3. For the purposes of the regulatory capital requirement, the ICA
     analysis is prepared on a consolidated basis for SB and separate analyses
     prepared for SL and SW. Annual FSA returns are prepared individually
     for each entity.

9.2.4. In Table 4 below I have summarised the Parties' published balance
     sheets as at February 2011 on a statutory accounting basis.




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Table 4 - Summary balance sheets of SE, SB, SL and SW at February 20
2011(Statutory Accounting Basis), Pre- and Post- transfer

Converted to USD 000's
                                          Pre-Transfer                               Post-Transfer
                                                  SE          SB       SL      SW           SE         SB
Balance sheet - assets
Investments in Group                                       8,650                                     8,650
Other Investments                              48,147     23,363   28,622    9,739     109,871
Total Investments                              48,147     32,013   28,622    9,739     109,871       8,650

Reinsurers' share of Claims outstanding       101,782    448,431   12,795              563,008
Cash                                            4,970      9,207    2,198     958       17,333
Amounts owed by Group Companies                 2,577      4,420                         6,997
Other assets                                   31,324     52,252    1,772      515      85,864         -
Total assets                                  188,800    546,323   45,388   11,213     783,073       8,650

Balance sheet - liabilities
- Statutory Reserve                                          240                                       240
- Contingency Reserve                          65,301     29,984   22,337   10,584     119,796       8,410
- Profit and loss account
Total reserves                                 65,301     30,224   22,337   10,584     119,796       8,650

Technical provisions
Claims outstanding                            116,220    479,667   19,897      -       615,784         -
Amount owing to Group                           3,378      8,966      -        -        12,344         -
Other Creditors and Liabilities                 3,901     27,466    3,153      629      35,149         -
Total liabilities                             188,800    546,323   45,388   11,213     783,073       8,650

           Note that I have not shown SL and SW post- Transfer since they will
           contain no assets or liabilities.

     9.2.5. A simplistic approach to comparing the relative solvency levels
          between companies which adopt broadly similar reserving standards is to
          compare the level of capital resources with the technical provisions, this
          gives an indication of the "headroom" provided by the company's
          financial resources to cover a worsening in the level of claims beyond the
          booked reserve estimates. The surplus capital resources are also available
          to meet expense overruns, reductions in asset values and other financial
          fluctuations in addition to those arising as a result of movements in
          claims provisions – elements of variability in the eventual financial
          outcomes which are collectively quantified by the ICA.

     9.2.6. In Table 5 I have set out the surplus ratios using the capital resources
          of the Parties. The capital resources are expressed on a regulatory basis –
          which excludes assets whose value is not admitted for regulatory



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               purposes and includes, in the case of SB, the net asset value of its
               subsidiaries, including Standard Re.

Table 5 - Comparative solvency ratios.

                                   Pre-Transfer                        Post-Transfer
                                                                                No         With
 Converted to USD 000's                                                  Guarantee     Guarantee
                                      SE        SB        SL     SW             SE           SE
 Capital Resources                 60,841   278,640   21,756   9,870        114,291      362,291
 Ratio of Capital Resources to :
 Gross technical provisions          52%       58%     109%                   19%           59%
 Net technical provisions           421%      892%     306%                  217%          686%
 MCR                                455%      453%     612%    271%          375%         1190%
 ECR                                391%      217%     382%    869%          261%          826%



         9.2.7. In the above I have shown comparative solvency levels for each of the
              Parties.

                      -     The pre-Transfer calculations are performed on a solo-entity
                            basis and I have not reflected benefit of the SB guarantee
                            which SE enjoys since this is not a direct component of SE’s
                            balance sheet.

                      -     I have shown the Post-Transfer comparative ratios for SE on a
                            solo-entity basis and also including the surplus assets of SB.
                            The latter basis reflects the total financial resources (excluding
                            member calls) which are available to meet the claims against
                            SE.

         9.2.8. From the above it may be noted that:

                       − Regulatory capital requirements have a considerable level of
                         headroom both before and after Transfer.

                       − The ECR value is available as a matter of public record and I
                         have also reviewed the ICA studies and the ICG applied by the
                         FSA, these are confidential to the Parties and to the FSA. I note
                         that an external firm of consultants had been retained to
                         benchmark and validate the assumptions, methodology and
                         results.

                       − I have not performed an independent assessment of the ICA in
                         view of the other external benchmarking which was carried out,
                         but I have reviewed the technical report prepared by CTC and I
                         am satisfied that the level of capital indicated under the ICA
                         studies is consistent with the profile of the liabilities .


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          − The ICA capital requirement is an estimate of the level of
            capital required to sustain a 1-in 200 adverse outcome, taking
            account of the inherent variability in claims, investment values,
            counterparty security and operational aspects of the business.
            Based on my assessment of the available regulatory capital
            reflected in the above table, the level of capital is sufficient to
            sustain an adverse modelled outcome in excess of 1-in-1000 for
            both SL and SW, with the SE threshold between 1-in-500 and 1-
            in-1000. For these purposes I have ignored the possibility of
            additional financial calls to members for funding, which would
            extend the remoteness of a material financial problem even
            further. Extreme probabilities such as these are a somewhat
            academic concept given the range of real-world uncertainties,
            but the level of comfort provided is such that I am satisfied that
            no policyholder is adversely affected by the Transfer.

          − The level of capital cover relative to net technical provisions is
            considerably greater than on a gross of reinsurance basis,
            reflecting the substantial reinsurance arrangements of the
            Parties. The most relevant capital measure in this context is the
            level of capital relative to the net technical provisions. On the
            basis presented in Table 5, the pre-Transfer capital ratios, when
            compared with SE post transfer before allowing for the effect
            of the SB guarantee, reduce. In order to form a more correct
            basis of comparison, I have shown, in the final column of Table
            5, the Post Transfer SE comparative ratios including the assets
            of SB which a more correct basis of reflecting the total financial
            resources of the group which may be deployed to meet member
            claims (i.e. reflecting the value of the SB guarantee). For SB the
            capital ratio post-transfer appears somewhat lower, however the
            pre-Transfer ratio does not take account of SB’s obligations to
            SE under the existing guarantee. Having considered the above
            method of comparison and the work performed in respect of
            the ICA, I am satisfied that no policyholder is adversely affected
            by the Transfer.

Summary of the Security position of affected Policyholders.

9.2.9. Before the transfer takes place the assets available to meet the claims
     of each set of policyholders are held within the companies with which
     they have policies. In practical terms, the next tier of security is
     represented by the internal capital management process and the internally
     specified intervention triggers which may adjust the levels of capital in
     group members. After the transfer the first recourse of policyholders is
     to the assets of SE alone, followed by the capital management process
     and the SB guarantee. The guarantee remains in place and the aggregate
     assets supporting it remain substantial.



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9.2.10. Although the ratio of capital resources to technical reserves or the
     surplus of capital resources over ICG will be reduced for some Classes of
     policyholders on transfer, the underlying security supporting their
     policies once the SB guarantee is brought into account remains
     substantial and does not, in my opinion represent a material impairment.

9.2.11. The quantum of assets held within SB may be modified by members,
     for example by way of reduced calls, and the situation remains the same
     post Transfer.

9.2.12. The overriding question therefore with respect to policyholder security
     (pre and post Transfer) relates to the ability of SB to continue to provide
     capital in the event that insufficient funds are available within SE to meet
     affected policyholders' valid claims. Based on

         -     The current level of funds,

         -     The extremely low likelihood of policyholders not recovering
               insured claims as reflected by the ICA calculation, and

         -     The ability of SE to raise additional capital through
               supplementary calls (which is a substantial additional source of
               funds, not reflected in the ICA or the SB guarantee) ,

there is, in my opinion no material impairment to the affected parties arising
as a result.




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9.3. Other considerations

    9.3.1. The other factors which I have considered that may be matters of
         concern for affected parties are set out below under the following
         headings :

              − Set-off
              − Possible impairment of reinsurance asset values as a consequence of
                the Scheme
              − Financial Services Compensation Scheme ("FSCS")
              − Guarantees provided to third parties and policyholders
              − EU Enquiry into P&I Clubs
              − Post balance sheet events
              − Progress in relation to compliance with the requirements of
                Solvency II


    Set-off

    9.3.2. I have considered the impact of the Transfer on any rights of set-off
         that may currently exist in favour of the Clubs’ creditors and the extent
         to which set-off rights may be altered as a consequence of the Transfer. I
         have also asked the Managers to advise me of existing or implied set-off
         which may arise as a consequence of the Transfer.

    9.3.3. I am satisfied that the Scheme does not create set-off issues that might
         affect my conclusions.


    Possible impairment of reinsurance asset values as a consequence of the
    Scheme

    9.3.4. I have considered the potential impact on the security of the affected
         policyholders due to an impairment of the third party reinsurance asset
         arising as a direct result of the Scheme. The potential for a loss of value
         in the reinsurance asset as a direct consequence of the Scheme is not, in
         my opinion a material factor.




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Financial Services Compensation Scheme ("FSCS")

9.3.5. The FSCS, established under FSMA 2000 is described as a "statutory
     fund of last resort" and is intended to provide compensation to
     customers of authorised financial services firms in the event of their
     insolvency.

9.3.6. I have discussed the extent of the application of the FSCS on
     policyholders affected by the transfer with the Managers and their legal
     advisors and am advised that there will be no involvement of the FSCS,
     and in any event the Transfer would not affect any existing rights under
     the FSCS.



Guarantees provided to third parties and policyholders

9.3.7. I have requested details of all guarantees issued in the course of
     business. Other than the guarantee provided by SB, I have been advised
     that in the normal course of business a Club may provide a guarantee in
     respect of certain claims (para 6.71) and that normal business practice is
     not affected by the Transfer.


EU Enquiry

9.3.8. On 26 August 2010 the EU Commission announced a review into the
     operations of the International Group of P&I Clubs. I have sought
     explanation from the Managers on the background to the Commission
     review and am advised that the Commission is substantially concerned
     with the perceived possibility of anti-competitive behaviour. I have
     discussed the possible outcomes of this enquiry with the senior
     management of CTC and possible changes that may become necessary.

9.3.9. In no case can I see how this enquiry or the possible outcomes can
     have a bearing on this Transfer since any action will have similar
     consequences irrespective of the Transfer.


Post balance sheet events

9.3.10. I have discussed with the Standard P&I Finance Director, the Standard
     P&I actuary, and with senior function holders, the extent to which claims
     developments, movements in asset values and other components of the
     financial statements have moved relative to expectations at the February
     2011 year end. I have been advised that there is no material difference
     from the values anticipated at year end.

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        9.3.11. As noted above, variations in claims and asset values occur frequently
             and I will prepare a brief update of my report shortly before the final
             scheme sanction hearing in order to reassess the opinion expressed in
             this report.

        9.3.12. I am aware that the members of each of the Parties to the proposed
             Transfer will be voting upon the Transfer at an AGM and I understand
             the outcome will be covered in a further witness statement. I am also
             aware that discussions are taking place with the international pooling
             groups and that further witness evidence will also cover the outcome of
             these discussions.



        Progress in relation to compliance with the requirements of Solvency II

        9.3.13. I have sought explanation from the manager of the Parties as to the
             progress which the Standard Group is making towards compliance with
             the forthcoming revision of the basis of supervision of regulatory
             solvency. This is a major initiative which is being implemented across the
             EU which places considerable emphasis on the establishment of
             regulatory capital on objective criteria related to the inherent risks
             specific to an insurance enterprise.

        9.3.14. The Managers have formed a Solvency II Steering Group, which meets
             fortnightly and co-ordinates and implements a series of workplans
             designed by external consultants in order to meet the requirements of
             Solvency II. The Steering Group reports its progress to the boards of
             each of the clubs.

        9.3.15. Standard Europe will adopt a partial internal model whereby Credit,
             Underwriting and Reserve risk will be calculated using the Club’s
             statistical model, with market and operational risk calculated using the
             Solvency II standard formula and then aggregated with the stochastic
             outputs.

        9.3.16. The club is engaged with the FSA in participating in the IMAP pre-
             approval process 7 although the Club has not formally entered this
             process. I am informed by senior managers of CTC that the club is
             working closely with the regulator on the IMAP currently. Standard
             Europe is completing a Solvency II self-assessment template and keeping
             the FSA apprised of progress towards Solvency II compliance on a
             regular basis.

        9.3.17. The Standard Group has been a participant in a Quantitative Impact
             Study (“QIS”), most recently “QIS5”. QIS is a field test of the impact of
7 Internal Model Approval Process – the FSA’s control process to ensure adoption of the principles

of the Solvency II regulatory capital regime by insurers

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                   the proposed Solvency II capital requirement at a point in time and is the
                   current best-guess as to what the final EU requirements of regulatory
                   capital will be using the standard formula approach. The table below
                   summarises the results of the most recent QIS submission (“QIS5”)


$ 000’s                  Pre - Transfer                               Totals
                               SE         SB      SL           SW        Pre-Transfer   Post - Transfer
Standard Formula
requirement               128,275     162,612   7,337         1,695           299,919          177,536



              9.3.18. From the perspective of the regulatory capital requirement it may be
                   seen that QIS capital requirement is $120m greater Pre-Transfer than
                   Post - Transfer. The reduction is principally due to the treatment within
                   the standard formula of reinsurance recoveries relating to Standard’s
                   participation on the IG. In Table 5 of paragraph 9.2.6 I have shown the
                   admissible regulatory capital of SE pre- and post-transfer. The capital
                   shown in the table does not include the contingent funds available to the
                   Parties by way of contingent calls from members, the amount is purely in
                   respect of admitted assets reflected on the balance sheets (“Tier 1”
                   capital). For the purposes of meeting the QIS5 capital requirement,
                   contingent capital is permitted (“Tier 2” capital), subject to a limitation
                   of 50% of the total regulatory capital. The total available Tier 1 plus Tier
                   2 capital is $228 million and I am satisfied that the Solvency II capital
                   requirements will be met post-transfer.




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10. Opinion

  10.1. Based on:

      •    The fact that there is no change in the administration of the Business
      •    The preservation of the economic interests of the members entered with
           the respective Parties
      •    My analysis of the changes which occur in the relationships of the Parties
           between themselves, with reinsurers and the IG and CGWRC before and
           after the transfer, including the value of the guarantee to be made available
           by SB.

   10.2.      I have reached the opinion that the transferring SB, SW and SL
              policyholders and the receiving SE policyholders are not materially
              affected by the Transfer.

   10.3.      In my opinion the Transfer has no adverse impact on any other
              connected parties.




   Dewi James FIA

   James, Brennan & Associates Limited

   5 October 2011




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  Appendix 1 - Professional experience D James

  Dewi James

  Fellow of the Institute of Actuaries, qualified 1988. Certified Lloyd’s actuary.

  Work experience

1980   –   1983     Government Actuary’s Department – Insurance supervision
1983   –   1984     Anglo American Life – 1 year running a small pensions unit in Johannesburg
1983   –   1985     Mercer life and pensions
1985   –   1988     Sturge Lloyd’s Agent reserving, syndicate planning and establishment ,
                    reinsurance security assessment
1988 – 1992         Ernst & Young wide range of consulting assignments
1992 – 1995         Alexander Howden – Various reserving and pricing consulting assignments
1995 – 2001         Zurich Insurance - corporate / chief actuary Zurich Re (UK), chief actuary
                    Turegum, chief actuary CMGL, pricing actuary and chief actuary for Zurich
                    Global Energy (London / Europe).

2001 –              Set up James, Brennan & Associates. Assignments include :
                    Development of a solution to the LMX property Catastrophe spiral claims
                    Various reserve reviews and investigations of Lloyd’s syndicates
                    US Statements of Actuarial opinion for London companies, part of the NAIC
                    returns
                    Various London market and mass market pricing analyses
                    Joint venture to develop a Dynamic Financial Analysis and statistical
                    simulation package and other technical software
                    Own and run web businesses – www.runoffcentre.com and
                    www.subrocentre.com used to trade and manage reinsurance debts and to
                    handle ocean marine cargo subrogation claims respectively.
                    Various approvals by the FSA to act as Independent Expert for portfolio
                    transfers under the UK Financial Services and Markets Act, 2000
                    Independent vote valuer on solvent schemes of arrangement and claims
                    adjudicator on solvent schemes
                    Capital modelling for various purposes including ICA and Solvency II

  Various publications and presentations – most relevant are
  Book - “Modern Actuarial Theory and Practice” published 2000, 2004
  Other research etc on :
     o US Savings and Loans,
     o US legal system working party,
     o Member of ABI commutations working party (2001),
     o Mitigation of reinsurance credit risk using debt assignment and set-off
     o Financial structures for commutation deals
     o Member of GIRO working party on US asbestos
     o Contributor to London market initiatives in managing US asbestos claims
         to the London market (“LASER” and “RASER”)




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Appendix 2 - Schedule of information provided in consideration of this report

2010 Year end (February 2011) audited financial statements and regulatory returns in
respect of :
      - Standard Bermuda
      - Standard Europe
      - Standard London
      - Standard War Risks
      - Standard Asia

Regulatory submissions in respect of the Solvency II quantitative impact assessment
(“QIS5”)
     - Standard Bermuda, on a group and solo entity basis
     - Standard Europe
     - Standard London
     - Standard War Risks 8

Other documents
   -   Internal management report on Standard Re as at Year end 2011
   -   Technical provisions and claims forecast summary in respect of the Standard
       Bermuda consolidated P&I Class and Defence Class business as at year end
       2011.
   -   Special report on reserving for asbestos related claims, as at year end 2011
   -   Individual Capital Assessment Report (ICA) in respect of Standard Bermuda
       (consolidated) based on business forecast to year end 20 February 2011.
   -   Individual entity ICA valuations as at in respect of :
                    Standard Bermuda (consolidated) (updated to May 2011)
                    Standard War (solo entity basis)
                    Standard London (solo entity basis)

    -    International Group Pooling Agreement. 2011
    -    War Risk pooling Agreement

    -    Detailed group structure charts for the Standard Group.

    -    Management Agreement between Standard Europe and CTC (Bermuda)
    -    Deed of guarantee by Standard Bermuda in favour of Standard Europe
         (2005)
    -    Copy of the quota share treaty between Standard Bermuda and Standard Re
    -    Copies of reinsurance cover notes for SW and of the IG


8 SW is too small to fall under the EU Insurance Directive and the calculations were performed for

internal benchmarking purposes

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-   First witness statement of Alistair Groom
-   Copy of email correspondence between CTC and members of IG
-   Claims case management report to the SB Board by CTC
-   The legal opinion of Stephen Moriarty QC




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Appendix 3 - Structure Chart Pre Transfer

                                         STANDARD CLUB GROUP
                                                                                  Grey     =   Incorporated in United Kingdom
                                                                                  Blue     =   Incorporated in Bermuda
                                                                                  Yellow   =   Incorporated in Singapore
                                                                                  Green    =   Incorporated in Australia

                                                                     50%
                      Standard                                    Quota-share                           Standard
                      Bermuda                                     Reinsurance                            London


                                                                                   100%
                                                                                Shareholding
                                                                                                        Poseidon
                                                                                                  Insurance Co. Pty. Ltd..
  75%                      20%                  90%              100%
 Voting                   Share-             Quota-share        Share-
 Control                  holding            Reinsurance        holding             80%
                                                                                Shareholding
                                                                                                        SRB Ltd.

Standard                  Standard                             Standard
                                             80%                  Re
 Europe                     Asia            Share-
                                            Holding
                                                                                 100% s/holding
                                              90%                                                 Hydra (Standard Cell)
                                     Quota-share Reinsurance
                     90% Quota-share Reinsurance
                         (Excluding US Risks)                               100%                         95%
                                                                            Shareholding                 Invested Assets

            = Owns or Controls
                                                                    Standard House
                                                                        Limited                    Taylor Hedge Fund
            = Reinsures

            = Holding Company Financial Guarantee
                      James, Brennan & Associates
                   Actuarial and Management consultants


    Appendix 4 - key terms and abbreviations

CTC           Charles Taylor Consulting
SB            Standard Bermuda
SE            Standard Europe
SW            Standard War Risks
SL            Standard London
BAS           Board for Actuarial Standards
Business      All of the insurance and reinsurance risks underwritten by SB,SE,SW.SL
CGWRC         Combined Group of War Risks Associations
ECA           Economic Capital Assessment
ECR           Enhanced Capital Requirement
FSCS          Financial Services Compensation Scheme
FSMA          Financial Services and Markets Act 2000
GICR          General Insurance Capital Requirement i.e. the minimum regulatory capital
              requirement under the Solvency I regulatory capital requirement
IBNR          Incurred But Not Reported (claims)
ICA           Individual Capital Assessment
ICG           Individual Capital Guidance
IG            International Group of P& I Clubs
IMAP          Internal Model Approval Process – the FSA’s control process to ensure adoption of
              the principles of the Solvency II regulatory capital regime
LoC           Letter of Credit
Manager       CTC
P&I           Protection and Indemnity
The Scheme    The insurance business transfer scheme between SB,SL,SW and SE
Transfer      An insurance business transfer scheme as defined in Part VII of the Financial
              Services and Markets Act 2000
Transferee    Standard Europe
Transferors   Standard Bermuda, Standard London, Standard War Risks.




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