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AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
 humAn resources               Transforming Tomorrow:
                               Navigating Risk for the New Generation Shipowner
                               New Generation Shipowners are being faced with a broad range of challenges.
                               New corporate strategies and processes are required to deal with an industry that is
                               being reshaped through market consolidation and shifts in international trade patterns.
                               The current boom in shipping places pressure on already existing shortages of
                               competent crew, increasing the need for an even greater focus on loss prevention
                               and training. Add to this situation environmental challenges as well as energy shortages
                               and ever more sophisticated national and regional governmental regulatory bodies.

                               our goal is to help the new generation shipowner navigate the risks arising out of
                               this range of challenges.

                               last year we launched the concept of the new generation p&i club – serving the
                               needs of the new generation shipowner. let’s look at this idea for a moment.

                               in earlier times, when evaluating risk, the future was only a mirror of the past.
                               the future exposure to risk was based on a simple analysis of past risks.

                               today, skuld’s approach to managing risk goes much further. it balances decisions
                               based on a qualified and sophisticated analysis of numbers – determined by patterns
                               of the past – with decisions based on more subjective experience-based knowledge
                               about what lies beyond those statistics. in doing so, we help our members and
                               clients to manage risk more effectively. this capacity to manage risk allows them to
                               make bolder decisions and forward-looking choices. in this way, we provide one of
                               the key elements of the energy that will drive the shipping industry forward.

                               ACCURATE, BOLD, CARING AND DEDICATED
                               Because we are committed to setting globally recognised standards with the needs
                               of future generations in mind, our position in the marine insurance industry brings
                               unique responsibilities. we aim to provide the leadership that will transform tomorrow’s
                               marine insurance industry. we have a clear vision of the future, underpinned by
                               a consistent set of values.

                               three of the skuld values – AccurAte, cAring and dedicAted – form our
                               core and provide continuity and stability. this core has a foundation in our unique
                               blend of practical experience and new thinking with a strong base in more than
                               a century of tradition. A fourth value – Bold – urges continual change, new direction,
                               constant improvement and the need to think outside the box at times. this is
                               illustrated in our vision of being the new generation p&i club.

                               AROUND THE CLOCK AND ACROSS THE GLOBE
                               this year’s Annual review takes a closer look at what this means for our members
                               and clients day-to-day. in three case studies available on, we take a
                               fictionalised look at three different incidents, involving dry cargo, stowaways and an
                               oil spill. running through these descriptions, you will observe some of the new ways
                               we are handling underwriting, claims and day-to-day service.

                               in underwriting, we make use of sophisticated, tailor-made insurance it systems
                               and risk assessment tools that are at the forefront of our business. our stringent
                               selection process protects existing members at the same time as it makes

skuld annual review 2007
AnnuAl review 2007             membership attractive. we assess exact risk and set a correct price based on
                               extensive experience and gain additional expertise through pre-entry surveys that
      introduction             balance both hard and soft indicators.
       Adding vAlue
   Key Figures 2007            in claims, our commercial approach focuses on handling cases internally in the club
       ceo’s report            in order to provide the swiftest, most professional service. our claims handlers are
 chAirmAn’s report             empowered to make decisions and take fast action which allows short turn-around
      underwriting             times. And by reducing the number of cases per claims handler in syndicates that
  risK mAnAgement              are close to our members, we provide what we believe to be the most personalised
   clAims hAndling             service in the business.
 humAn resources
                               In Service, we are proactive and reflective, and also deal with issues that are
                               outside the normal framework of our business. in this way we are helping to set
                               globally recognised standards to meet new generation needs. in addition, we
                               promote active initiatives aimed at loss prevention, working to stop claims before
                               they happen.

                               This approach is a sound one. And it is yielding results. As you will see in the financial
                               section of this year’s Annual review, skuld achieved organic growth, as well as new
                               members and operators in all markets in 2007. in addition to delivering a surplus for
                               last year, our free reserves have now passed the usd 200 million level.

                               A REFLECTIVE APPROACH
                               since our last report, we commissioned det norske veritas (dnv) to run a review
                               of possible ways skuld might reduce its environmental footprint. this has provided
                               some guidance on steps we in skuld may take in areas such as travel, recycling
                               and energy management. one of the initiatives we are taking now is to publish this
                               Annual review on instead of in paper copy. we will still be publishing our
                               accounts in paper format this year, but provide only a web version starting next year.

                               And you will be seeing more of us. we have now launched a “new generation”
                               graphic profile to emphasise how we live our values in Skuld. Our vision is all
                               about helping our members better navigate risk and, in so doing, supporting them
                               in making informed choices.

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
 humAn resources               Phase I: Assessing the risk

                               Potential members first encounter Skuld through our underwriters. They are looking
                               for suitable cover for their risks at an acceptable price. skuld’s demanding criteria
                               for accepting new members involves a two step evaluation. First, a risk assessment
                               on whether to provide cover for the potential member and their fleet. Second, setting
                               an adequate premium to cover that risk. By surveying a portion of vessels from a
                               fleet to be entered – and subsequently conducting an office audit – the Skuld team
                               obtains a thorough overall assessment as to how the shipowner is conducting its
                               business. this provides support for our underwriters’ recommendations. the skuld
                               competitive edge is the top quality of our members and clients.

                               Phase II: Service after signing

                               once a shipowner or client becomes a member, they have frequent contact with
                               skuld through our local syndicates. these contacts may concern policy maintenance,
                               renewals, discussions on risk changes and possible additional covers to current
                               policies. we work to share loss prevention knowledge with members through circulars,
                               handbooks, workshops, projects, and articles in skuld’s Beacon magazine and on
                      we help members manage their own risks, working together to prevent
                               future losses and achieve better results. we assist with everything from cargo
                               damage to stowaways. skuld’s broad range of courses include an introduction
                               to p&i, as well as seminars on loss prevention and media training.

                               Phase III: Claims & Incidents

                               members report incidents that may give rise to claims through our 24-hour
                               emergency number or our local syndicates. this might include anything from cargo
                               claims to personal injuries. All p&i claims are handled by the respective skuld local
                               syndicate, which has a close relationship with the member. our in-house legal team
                               of nearly 60 lawyers across our syndicates has a commercial, hands-on approach
                               to claims handling. Fast solutions once an incident arises – made possible by high
                               authority limits and short lines of command – help to minimise the impact of claims
                               on members’ business activities. our global network of local correspondents acts
                               quickly to make sure no valuable information is lost.

                               Phase IV: Major Incidents

                               A major incident can strike anyone. should such an event happen, skuld will be
                               there. Our Casualty Response system is a distributed and flexible organisational
                               tool for dealing with the crucial early stages of a major event – and then following
                               it through the entire life cycle of the incident. our members can draw on an impressive
                               combination of both in-house legal talent from many jurisdictions, as well as team
                               members with extensive seafaring experience. they work to minimise the negative
                               impact of the incident while they co-ordinate and control skuld’s response to a
                               casualty, establishing clear lines of communication with the member and public
                               authorities, and helping to manage relations with the media.

skuld annual review 2007
AnnuAl review 2007             Phase V: Re-assessment
      introduction             experience in handling major incidents can help in normal cases later. Following
       Adding vAlue            each incident, skuld holds case reviews with its claims handlers to see what may
   Key Figures 2007            be learned. periodic team meetings help to gain crucial balance between local
       ceo’s report            responsiveness and integrated global action. we add to our case database and
 chAirmAn’s report             refine the Skuld risk analysis IT tools. If a claim raises concerns regarding the
      underwriting             quality of a vessel or the management systems of a member or client, we take this
  risK mAnAgement              up with them as a matter of improving risk awareness. Any member may be struck
   clAims hAndling             by an incident. we seek long-term relationships based on mutuality of values and
 humAn resources               a sound approach to risk.

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
  humAn resource                    KEY FIGURES 2007

                                    For the year 2007 Skuld booked a surplus of nearly USD 12 million, continuing
                                    its record of strong results over the past five years. During the year, the association
                                    experienced an increasing number of large claims, including two major losses
                                    reported to the Pool, and the cost of other club Pool claims has continued at a very
                                    high level. Despite the tougher claims environment, the association has once again
                                    achieved its goal of producing a positive underwriting profit of over USD 6 million.

                                    our return on assets including our currency hedge dropped to 4.5%, compared to
                                    a budget estimate of 6.2%. the reduced result can mainly be seen in the context of
                                    the sharp decline in global financial markets in the last quarter, with falls in equities
                                    and high yield bonds as the main negative drivers (see chart below). the return on
                                    assets figures are net of fees and based on returns in USD.

                                    INVESTMENT PERFORMANCE                                             ASSET ALLOCATION
                                    / IN PERCENT                                                       / IN PERCENT
                                          47%                                                          Commodities                       Private Equity
                                                                                                       Hedge Funds

                               20                        5%             5%

                                    COMMODITIES         BONDS        HEDGE FUNDS     EQUITIES

                                    skuld’s strong focus on enterprise risk management has proved successful under
                                    the volatile market conditions in our industry, contributing to the positive results.

                                    contingency reserves have increased to a record usd 204 million, up from usd
                                    192 million. the association maintains its position as one of the strongest clubs in
                                    the international group and is well positioned to meet the current volatile market
                                    conditions, which include the rising Pool claims and uncertain financial markets.
                                    Skuld’s financial strength is confirmed by Standard and Poor’s A- rating. According
                                    to Standard & Poor’s, this rating reflects our continued strong operating performance,
                                    competitive position and financial flexibility.

                                    FIVE-YEAR FINANCIAL SUMMARY
                                    / AMOUNT IN MUSD
                                                                                        2003          2004        2005         2006     2007
                                    Premiums and calls for own account                   109           129         140          155      173
                                    Claims incurred for own account1)                     87            86          95          121      137
                                    Gross investment revenue                              31            13          24           34       10
                                    Balance carried to contingency reserve                31            32          42           40       12
                                    Contingency reserve                                   82           113         151          191      204

                                    1)   A proportion of overhead related to claims handlers has been allocated to claims since 2003.

skuld annual review 2007
AnnuAl review 2007                        PREMIUM AND CALLS FOR OWN ACCOUNT              CLAIMS FOR OWN ACCOUNT
                                          / USD MILL                                     / USD MILL
                                    250                                            250
       Adding vAlue                 200                                            200
   Key Figures 2007
       ceo’s report                 150                       140                  150                                      137
 chAirmAn’s report                             109

      underwriting                  100                                            100         87      86

  risK mAnAgement
                                     50                                             50
   clAims hAndling
  humAn resource
                                      0                                              0
                                              2003     2004   2005   2006   2007             2003     2004   2005   2006   2007

                                          GROSS INVESTMENT RETURN                        BALANCE CARRIED TO CONTINGENCY RESERVE
                                          / USD MILL                                     / USD MILL
                               50                                                  50

                               40                                                  40
                                               31                                             31       32
                               30                                                  30

                               20                                                  20
                               10                                                  10

                                0                                                   0
                                              2003     2004   2005   2006   2007             2003     2004   2005   2006   2007

                                          CONTINGENCY RESERVES PER YEAR
                                          / USD MILL

                                    200                              191

                                    100        82


                                              2003     2004   2005   2006   2007

skuld annual review 2007
                               / AMOUNT IN MUSD

      introduction             TECHNICAL ACCOUNT                                                        2007      2006
       Adding vAlue            Premiums and calls                                                      192,7     174,1
   Key Figures 2007            Reinsurance premiums                                                    -20,0     -19,0
                               Premiums for own account                                                172,6     155,1
       ceo’s report            Claims incurred for own account                                        -137,1    -121,1
 chAirmAn’s report             Acquisition costs                                                       -20,3     -18,4
                               Administrative expenses                                                   -9,2      -8,8
                               Net operating expenses                                                  -29,5     -27,2
  risK mAnAgement              Balance carried to non-technical account                                   6,1       6,7
   clAims hAndling
                               NON TECHNICAL ACCOUNT
  humAn resource               Balance from technical account                                            6,1       6,7
                               Net investment income                                                     8,7      33,7
                               Taxes                                                                    -3,3       0,0
                               Balance carried to contingency reserve                                   11,5      40,4

                               BALANCE SHEET AS OF 20/02/08
                               / AMOUNT IN MUSD

                               ASSETS                                                                  2007      2006
                               Financial investments                                                  461,4     410,8
                               Debtors                                                                  6,5       5,2
                               Other assets                                                            33,6      49,6
                               Prepayment and accrued income                                            3,4       2,4
                               Total assets                                                           504,9     468,1

                               Provision for outstanding claims for own account                       280,9     260,0
                               Contingency reserve                                                    203,5     191,4
                               Technical provisions for own account                                   484,4     451,4
                               Provisions for other liabilites                                          8,8       4,8
                               Creditors                                                                8,2       8,6
                               Accruals and deferred income                                             3,4       3,3
                               Total liabilities                                                      504,9     468,1

                               In the P&L, a relevant portion of overhead expenses are allocated to
                               claims-, acquisition- and investment expenses respectively.

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
  humAn resource               CEO’S REPORT

                               Last year we launched our vision of being the New Generation P&I Club – serving
                               the needs of new generation shipowners. Our goal is to provide the leadership that
                               will transform tomorrow’s marine insurance industry. The events of 2007 showed
                               that we are on the right track. Our swift and professional handling of last year’s
                               Hebei Spirit incident in South Korea won positive responses from both authorities
                               and the shipping community.

                               Skuld’s financial results – set against the background of a worsening claims
                               environment and deteriorating underwriting results in the industry as a whole
                               – are even more satisfying. we once again see a positive technical result that
                               confirms our long-term strategy of underwriting members’ risks at a self-cost level.

                               so we must be on the right track. Basically at skuld, we embrace any change that
                               will further improve our systems and tools for risk management, pricing and claims
                               handling. This is all part of our constant and unswerving commitment to finding
                               the best solution to our members’ maritime insurance needs, around the clock and
                               across the globe. that way our members may concentrate on the changes required
                               to take their business to the next level.

                               SOPHISTICATED RISK MODELS
                               we have given particular emphasis over the past several years to risk management.
                               in the past decade we have dramatically increased our ability to measure risk
                               accurately. with a more consistent approach to enterprise risk management that
                               began in 2000, skuld has run advanced internal risk models that emphasise such
                               areas as risk management culture, risk controls, emerging risk management, risk
                               and capital models and strategic risk management. this approach was rewarded
                               last year when standard & poor’s raised its long-term rating for skuld to A-.
                               According to S&P, the upgrade reflects our continued strong operating performance,
                               competitive position and financial flexibility.

                               Our approach to risk management has a direct benefit for our members and
                               operators. to the extent we help them to understand risk, they are able to take more
                               aggressive and informed choices. these types of choices support economic growth
                               and ultimately improve the quality of life across the globe. how free we are to make
                               such choices defines not only what it means to be human, but also what it takes to
                               succeed in any enterprise. shipping is no exception.

                               CAREFUL AND SOLID GROWTH
                               let’s take a look at our progress last year. skuld achieved both organic and fresh
                               growth in all markets in 2007. we added approximately 3 million gt to the entered
                               fleet at the 2008 renewal, an increase of 7%. Our owner’s tonnage is now
                               approaching 45 million gt. when our charterers’ volume is added, our total
                               insured fleet stands at approximately 85 million GT.

                               Skuld’s surplus reached USD 12 million in 2007. For the fifth year in a row we
                               achieved a positive technical result, this time of usd 6 million before investment
                               returns. this achievement was in spite of the current weak p&i market. the major
                               portion of the result was achieved through appropriate pricing, effective cost control
                               and disciplined underwriting. our free reserves increased by almost 7% and now
                               stand at a record usd 204 million. this positions us well to meet new regulatory

skuld annual review 2007
AnnuAl review 2007              requirements and establishes skuld as a strong A rated club for the future. we
                                generated USD 10 million from investment income, a figure that is disappointing
      introduction              when compared with the previous year (usd 34 million), but not surprising following
       Adding vAlue             the recent sharp decline in global financial markets.
   Key Figures 2007
       ceo’s report             OUR MOST IMPORTANT RESOURCE
 chAirmAn’s report              the most important factors in our successful move to be the new generation
      underwriting              p&i club are our experienced staff, close connections with our members through
  risK mAnAgement               skuld’s international network, and our regional syndicate approach to prioritising
   clAims hAndling              resources. our underwriters and claims handlers are empowered with high authority
  humAn resource                levels, so they may take swift action, providing the professional and personalised
                                service that our members have come to expect.

                                our wealth of in-house maritime and legal resources covers a wide geographical
                                range of jurisdictions and may be called upon quickly in case of an emergency.
                                excellent service requires person-to-person interaction and understanding, which is
                                why our valuable human resources will continue to be a major focus at skuld. these
                                qualities provide a solid platform for further growth and even closer contact with our
                                members in 2008.

                                douglas Jacobsohn
                                President and Chief Executive Officer

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
  humAn resource                CHAIRMAN OF THE BOARD’S REPORT

                                A positive technical result for the fifth consecutive year contributed to Skuld’s
                                strong financial performance in 2007. Reserves reached a new record of over USD
                                200 million. The club’s strong operating performance and competitive position will
                                continue to grow based on both organic growth and new product areas such as the
                                charterers’ and offshore energy markets. The club’s dedicated staff, backed by
                                robust systems and a proactive approach to International Group activities,
                                reinforces Skuld’s position as a first class P&I provider.

                                with free reserves at a high of usd 204 million – and consecutive technical
                                surpluses over the past five years – the Board is pleased with Skuld’s performance.
                                the Board is also pleased with skuld’s increased s&p rating, as this has been
                                a target of the club’s long-term strategy and as it recognises skuld’s commitment
                                and consistent high performance.

                                retaining current members and attracting new ones are key success factors in the
                                P&I field. We increased our owners’ tonnage in 2007 and added charterers’ tonnage
                                as well. We now have approximately 85 million GT of insured fleet.

                                there are, however, a number of challenges ahead for shipowners – our members
                                and clients – that will also affect the club. the current boom in shipping brings with it
                                a consequential and undesirable boom in claims due to greater shipping activity and
                                higher commodity values. in addition, the demands of a heavy shipping market also
                                lead to a shortage of competent crew. this is a critical issue for shipowners. we
                                observe that human error is often the root cause of many collisions and groundings,
                                which increases the claims level overall. we therefore see that there is a clear trend
                                for costs per claim to increase.

                                That is why Skuld continues to be very selective in the fleets we agree to cover.
                                we perform pre-entry surveys for new members and continue to focus not only
                                on the ship’s hardware but also the “software” onboard and onshore. we are also
                                active in initiatives aimed at loss prevention. so far, this approach has been very
                                rewarding for all parties.

                                STRATEGY GOING FORWARD
                                in order for the club to meet the challenges ahead, the Board has seen the need
                                for the club to increase its rate of growth, together with a further increase in free
                                reserves. the question then becomes what criteria should be used to measure that
                                growth – and how to achieve it without jeopardising skuld’s high level of service?

                                the strength of the club’s results and its reserves, as well as the increase in p&i
                                tonnage, all indicate that Skuld’s current strategy will continue to benefit members.
                                in addition, the Board has been involved with skuld’s management in developing
                                a clear focus on the development of a wider range of products, as well as organic

                                we have allocated new resources to strategic growth areas, such as charterers’
                                insurance. skuld is an active provider of charterers’ liability cover for both time and
                                voyage charterers. this is an area we will continue to develop. in addition, skuld’s
                                offshore syndicate is developing what it calls “seamless cover” – a new product for
                                the offshore-energy market that is tailored for specific member needs and joined

skuld annual review 2007
AnnuAl review 2007              with solutions for all offshore risks. The Board is confident that Skuld will meet the
                                challenges ahead.
       Adding vAlue             We will also continue to support Skuld’s office and syndicate structure – built on
   Key Figures 2007             the belief that being close to members and their operations is a major strategic
       ceo’s report             advantage over its competitors.
 chAirmAn’s report
      underwriting              THE MUTUAL SYSTEM
  risK mAnAgement               Although we are pleased with our current results, we must not be complacent.
   clAims hAndling              the risks in the world around us are increasing – and becoming increasingly
  humAn resource                more complex – whether such risks are financial, environmental, terrorist or
                                energy-based, to name just a few. unfortunately, the current political and regulatory
                                responses from national and regional players to a number of these threats are also
                                becoming increasingly complex, often involving reactions that, despite all the best
                                intentions, ultimately appeal more to emotion than fact. it is therefore important for
                                skuld to be proactive and thoughtful when dealing with issues outside the normal
                                framework of our business. only then will we effectively evaluate potential risk and
                                control cover to match shipowners’ needs.

                                Because skuld thinks it is important to clearly voice its opinion on important
                                shipping industry issues, the club is also becoming more active in the day-to-day
                                functioning of the 13-member international group of p&i clubs. the club’s goals
                                when working with the international group are (1) to support good legislation and
                                oppose bad legislation, the kind that is excessive, unnecessary or unworkable, and
                                (2) to provide good insurance solutions when new legislation is introduced. the
                                International Group has a good record of reaching consensus and finding balanced

                                HUMAN CAPITAL COMPANY
                                the Board is impressed with the skuld staff and its combination of diverse
                                international in-house legal talent and experienced ex-seafarers, as well as its
                                professional syndicates and a dedicated support staff. this makes skuld a “human
                                capital company” with a knowledge base that benchmarks positively in the industry.

                                skuld’s staff is supported by modern it systems for monitoring and assisting in
                                claims handling and underwriting. these also provide a rich database for assessing
                                risk and facilitating loss prevention. in addition, by keeping expertise in-house and
                                decreasing the case load per claims handler in order to reduce claims turn-around
                                time, skuld can provide the high level of service its members expect while reducing

                                the Board and management have spent considerable time on the human resources
                                challenges facing the shipping industry as a whole. the Board wishes to express
                                its gratitude to skuld’s staff for its dedicated efforts and teamwork in bringing the
                                association to where it is today.

                                in summary, skuld’s strong performance in 2007 and the club’s further development
                                of its human capital will surely benefit Skuld’s members and provide a springboard
                                for more progress in 2008.

                                erik gløersen
                                chairman, Board of directors

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
  humAn resource                UNDERWRITING: Continued growth

                                Skuld enjoyed a growth in volume in 2007 that was well in excess of recent years.
                                The growth came in all Skuld’s main markets. As a result of the large increase
                                in tonnage, the average age of all Skuld-entered vessels has declined and the
                                average vessel size in GT has increased. Low-value claims are holding steady but
                                at a lower frequency than before. Large claims have recently begun to show a slight
                                negative trend. Due to five years of positive technical results, Skuld was again able
                                to announce the lowest renewal rate of all the International Group clubs. We are
                                now also focusing on the rig and offshore-energy insurance markets and continuing
                                our substantial business with charterers.

                                many of the fundamental trends we saw in 2006 continued in 2007. shipping
                                markets were strong for much of the year, with some periods yielding record daily
                                earnings, both for the main dry and wet sectors. we also observed substantial
                                growth in an already voluminous order book for ship newbuildings during 2007,
                                indicating that shipowners believe there will be continued positive developments
                                in their respective markets.

                                offsetting the positive signals from the shipping market were the negative
                                developments in claims. 2007 stands out as another year in which the industry
                                was severely burdened by liability claims. the total cost of p&i claims in the
                                international group pool remained at more or less the same record level as
                                the previous year.

                                BUSINESS IN 2007 AND RENEWALS FOR 2008

                                skuld enjoyed a growth in volume in 2007 that was well in excess of recent years.
                                measured for the full policy year, the gross tonnage (gt) grew by a record 17.2%,
                                with particularly rapid growth occurring from the summer to the end of the year.
                                measuring the time averaged tonnage (pro rata entries) for the year in total, the
                                growth in volume for this period stands at just above 14% when compared to
                                a similar period in the year before. By contrast, the total world fleet grew by only
                                about 6 - 7% in the same period.

                                skuld’s increase in market share during the year resulted from four areas:

                                – existing members taking delivery of newbuildings or buying second hand ships
                                – existing members acquiring tonnage as a whole by buying other companies
                                – newly established companies joining skuld
                                – members of other p&i clubs entering new acquisitions to skuld

                                the growth came from all skuld’s main markets, with particularly strong growth
                                coming from Denmark, Greece, Germany and China. Overall fleet composition with
                                regard to tonnage type remains constant – the club’s new tonnage is being added in
                                the same proportion of vessel type as is currently entered today. As a consequence
                                of the large increase in tonnage, the average age of skuld-entered vessels has
                                declined and the average vessel size in gt has increased.

skuld annual review 2007
AnnuAl review 2007              in reviewing the claims performance of skuld owner-members in 2007, we note
                                with satisfaction that low-value, or “attritional” claims, remain steady and occur at a
      introduction              substantially lower frequency than at the start of the new millennium. the frequency
       Adding vAlue             of larger claims has also decreased since 2000, but began to trend upward in 2007.
   Key Figures 2007             skuld members have been involved in two cases where total costs will most likely
       ceo’s report             exceed the club’s retention level of usd7 million per incident, and these cases
 chAirmAn’s report              have therefore become pool claims. Both of these cases involve oil spills from
      underwriting              tankers – one in the caribbean and one in south Korea.
  risK mAnAgement
   clAims hAndling              this slightly negative trend in skuld’s larger claims may be seen as running in
 humAn resources                parallel with the negative trend for pool claims arising from all the international
                                group clubs, as described above. skuld anticipates that the total cost of claims
                                on the pool for distribution between the international group’s 13 clubs will exceed
                                usd 500 million for both 2006 and 2007. this is more than three times the average
                                annual cost for the years in the preceding decade. this substantial increase is a
                                consequence of the increasing number of cases as well as the increasing cost
                                per case.

                                many attempts have been made to explain this adverse development. Broadly
                                speaking, skuld considers the increase in the cost per case to be a consequence
                                of larger ships, increasing salvage costs, increasing commodity or cargo prices, and
                                increasing crew wages – combined with an increase in the retention level carried by
                                the clubs, as well as a toughening attitude to liability issues worldwide. if we look in
                                more detail at the pool claim incidents, it appears that human error is the root cause
                                of many of them, particularly a number of groundings, collisions and similar
                                ship-handling events in recent years.

                                the global shortage of ship crews poses an obvious challenge for all segments
                                of the shipping industry. Despite increased salaries and improved crew benefits,
                                recruiting, training and maintaining a sufficient volume of new cadets and ratings are
                                still difficult. This situation will not be helped by the unprecedented expansion rate
                                of the world fleet over the next 2 to 4 years. The lack of crews, and the shortage of
                                competent crews, will be a challenge for the entire industry over the next several
                                years. As a result, skuld anticipates that the high level of pool claims observed in
                                recent years will most likely continue.

                                most of the p&i clubs announced single digit general increases for the February
                                2007 renewal. For the February 2008 renewal, however, the majority of clubs
                                announced increases in the range of 15 to 17.5% – with some clubs asking for 20%
                                and above. these dramatic increases should be seen as a direct consequence of
                                the high continued levels of pool claims that are being carried by the various clubs.
                                As part of the international group, skuld naturally also faces the same volume of
                                pool claims, although this burden is somewhat reduced by a relatively lower
                                percentage of contribution to the pool following our positive performance against
                                the pool for several years.

                                even with our contribution to the pool, skuld was still able to limit the general
                                increase to 7.5% for 2008. Such renewal increase, the lowest announced of all
                                clubs, was made possible by skuld’s continued positive technical results.

                                As of noon 20 February, skuld’s owners’ book grew by a net of about 0.3 million gt.
                                in addition, our members have committed a further 3 million gt of newbuildings for
                                delivery and entry during the course of the 2008 policy year. This corresponds to a
                                growth of some 7% compared to entered tonnage just prior to the renewal. As in the
                                past, skuld actually achieved the announced increase for the renewed tonnage.

                                skuld continues to focus on being a market leader in providing p&i cover to
                                the charterers’ market -- and this business continues to grow. during 2007, the
                                time-averaged tonnage for charterers’ business amounted to 50 million gt. this
                                is an increase of approximately 26% on the previous year and the seventh
                                consecutive year with volume growth. care should be taken in comparing the

skuld annual review 2007
AnnuAl review 2007                   charterers’ tonnage to that of the owner’s tonnage, however, as the two books
                                     of business are not comparable in terms of either risk measurement or exposure.
      introduction                   The financial performance of Skuld’s charterers’ book has shown positive technical
       Adding vAlue                  results for many years, even when considered as a stand alone product.
   Key Figures 2007
       ceo’s report                  OFFSHORE-ENERGY
 chAirmAn’s report                   the rig and offshore-energy insurance market needs stimulation and new
      underwriting                   alternatives. A number of skuld members have requested that we return to the
  risK mAnAgement                    market, so a new skuld offshore syndicate is now developing what it calls
   clAims hAndling                   “seamless cover” for skuld members. the new product will be tailor-made for
 humAn resources                     specific member needs and will be joined up with solutions for all offshore risks.
                                     this will include traditional p&i coverage with wrapped-in extra cover for those
                                     areas not typically dealt with under marine insurance. the key is to be involved
                                     at an early stage of the tender process so that the coverage may be customised
                                     to fit a member’s actual needs based on the risks involved.

                                     P&I OWNERS GT                                                          P&I CHARTERERS GT
                                     / MILL                                                                 / MILL
                                     50                                                                      50

                                40                                                               38    40                                                  39
                                                                                   34                                                        33
                                30                                                                     30
                                                        26                                                         26
                                20                                                                     20

                                10                                                                     10

                                0                                                                      0
                                          2003        2004         2005          2006          2007               2003        2004          2005         2006         2007

                                     PREMIUMS DISTRIBUTED*                                                  PREMIUMS DISTRIBUTED*
                                     / BY COUNTRY                                                           / BY VESSEL TYPE
                                     Others                                                 Norway
                                                                                                            General cargo                                         Unitized
                                     Far East                                              countries
                                                                                             Norway                                                                Bulker
                                     USA                                                                                                                            types
                                     Rest of
                                                                                            Greece          Gas/Chemical
                                                                                                            tanker                                           Passenger

                                     * Total gross premium all products, USD 193 million                    * Total gross premium all products, USD 193 million

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
 humAn resources                RISK MANAGEMENT & LOSS PREVENTION:
                                A coordinated approach
                                Skuld’s technical and loss prevention functions were integrated into a new Risk
                                Management and Loss Prevention Department in 2007. This move was aimed
                                at delivering even stronger support to Skuld’s Syndicates in providing both their
                                underwriting and claims services to members and clients. The new coordinated
                                function provides swift and effective support as part of Skuld’s flexible and fully
                                integrated Casualty Response team. Technical risk management knowledge is now
                                fully available across the club for dealing with the crucial early stages of a casualty
                                as well as through the complete cycle of major events – and of course the important
                                work of preventing claims before they happen.

                                when new vessels are entered with skuld, the main responsibility for risk control
                                resides with our risk management & loss prevention department, which is
                                based in the Skuld main office in Oslo. The Risk Management & Loss Prevention
                                department consists of three master mariners, a survey co-ordinator and a loss
                                prevention officer.

                                the department also assists claims handlers with maritime technical, nautical and
                                cargo matters. in the critical area of casualty response, risk management & loss
                                prevention have a central role. our staff can give support on short notice of a
                                casualty anywhere in the world in order to assist our members most effectively.

                                skuld has adopted three methods for controlling the risk on the approximately 3100
                                vessels entered in the club in order to make sure the vessels meet our required
                                quality standards.

                                SURVEY PROGRAMMES
                                like other members of the international group (ig), skuld is required to follow
                                the ig survey requirements. in addition, skuld has implemented a number of
                                mechanisms and trigger factors that enable us to initiate condition surveys on
                                vessels should we receive information that give rise to concern about the condition
                                of a vessel.

                                As part of the ig survey requirements, entry surveys are required for all seagoing
                                vessels of 12 years and older upon entry into a club. in the event of the entry of a
                                fleet, a representative number of the vessels in the fleet will be surveyed.

                                Skuld’s trigger factors. if, during the handling of a p&i claim, information is brought
                                to the claims handler’s attention that gives rise to concern about the condition of a
                                vessel, this serves as a trigger point for a condition survey by the club. skuld also
                                carries out an annual loss prevention survey campaign. this includes a desktop
                                analysis carried out jointly with the loss prevention officer. Parameters such as
                                vessel type and age, classification society, flag state, port state control detention
                                ratio, and loss record, among other focus areas, are used to select the vessels
                                subject to surveys.

                                Survey form. Available on skuld is using a standard survey Form that
                                we developed jointly with the two other scandinavian clubs. the present version 3.0
                                of this form is now being used by six international group clubs. A further three clubs
                                are expected to adopt the form in the near future. the form is designed to extract
                                data for statistical purposes. the form can be downloaded from our website.

skuld annual review 2007
AnnuAl review 2007              Surveyors. in order to facilitate and increase the precision of the uniform condition
                                Surveys, Skuld has approved about fifty survey companies around the world. Most
      introduction              of these companies are also used by other clubs so they are aware of the key p&i
       Adding vAlue             requirements.
   Key Figures 2007
       ceo’s report             OFFICE AUDITS
 chAirmAn’s report              Office audit. The Office Audit risk control method was adopted a few years ago.
      underwriting              the key function of this audit is simply to serve as an additional input in underwriters’
  risK mAnAgement               risk assessment prior to a decision on whether to quote on a potential new member.
   clAims hAndling              In addition to serving as a way to assess the efficiency of the Safety Management
 humAn resources                System, the office audit also covers other important areas such as the crewing and
                                technical departments. The office audit is also useful if a Skuld syndicate becomes
                                concerned about a specific member’s performance due to a negative loss record
                                trend or if, for any other reason, the syndicate considers there is significant change
                                in the risk to which skuld initially agreed.

                                MONITORING OF DETENTIONS & BANNED VESSELS
                                Port State Control detention lists. By far, the method that covers the largest number
                                of entered vessels is the regular checking of the port state control detention lists.
                                these are published by the three major inspection regimes in the world – the paris
                                mou (memo of understanding on port state control), the tokyo mou and the us
                                coast guard. A tool to match monthly detention lists against a list of skuld’s entered
                                vessels has been developed. If a Skuld vessel is flagged, we closely examine the
                                grounds for detention, the vessel’s class and flag state, its manager’s detention
                                ratio, and skuld’s loss record for the vessel/member, among other factors.

                                Banned vessels. the Black list issued by the european maritime safety Agency
                                (emsA) and paris mou’s Banned vessels are monitored in a similar way to the port
                                state control lists. with a focus on the overall level of seriousness as opposed to
                                a single detention, skuld starts an immediate dialogue with the member as soon
                                as an entered vessel is recorded.

                                in 2007, skuld continued its focus on the “human factor” through the club’s crew
                                programme. this programme enables skuld to focus on the human aspect of
                                claims, in order to find ways of reducing the number of incidents caused by
                                unwanted behaviour. the programme placed its focus on two main areas this
                                year: (1) a series of seminars to increase knowledge of the human factor and (2)
                                the pre-employment medical examination project.

                                Gathering adequate information about the human element and finding effective
                                solutions to modify unwanted behaviour is a challenge. research carried out by
                                skuld has focused on what a range of organisations are doing in order to meet this

                                Human element seminars. skuld has put together a series of “human element”
                                seminars to provide advice and training for our members on this subject. we have
                                taken knowledge from other industries and adjusted it to suit shipping. these
                                courses are now available to members.

                                Pre-employment medical exams. skuld has established an enhanced pre-employment
                                medical examination service in the philippines. we co-operate with two clinics in
                                manila, and the examination is one of the most comprehensive in the market.
                                the examination will ensure a member obtains an accurate overview of a
                                crewmember’s health before sending him/her on board, thus facilitating
                                a reduction in illness-related claims.

                                In the coming year, we will refine Skuld’s loss prevention services. This will be
                                followed by the development of more courses and new services for the benefit of
                                our members.

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
 humAn resources                CLAIMS HANDLING: A vital part of P&I coverage

                                A new approach to claims, with an increased focus on productivity and turnaround
                                times, has allowed us to reduce claims duration by over a third – tending toward 24
                                months down from three years. Our more commercial claims approach promotes
                                the swift settling of more litigious cases, resulting in the reduction of external legal
                                costs by more than 30% over the past several years. A new, broader approach to
                                casualty response was demonstrated with the handling of last year’s Hebei Spirit
                                oil spill incident, which handling won positive feedback from authorities and the
                                shipping community.

                                Effective and efficient claims handling is one of the major drivers of a professional
                                p&i club. At skuld we have re-engineered our approach to claims by handling more
                                work in-house and streamlining the process for the benefit of members and the club.

                                through this approach we have not only cut our external legal costs by over 30%
                                – down over usd 6.2 million annually from when the project began in 2003 – but we
                                also have managed to reduce the average time to resolve a case from three years
                                to approximately 24 months, which is below the international group average. in
                                order to increase efficiency we found we had to substantially reduce the case
                                load for each claims handler, enabling them to have a better overview of each
                                case – facilitating quality handling and a faster turn-around.

                                MOVING CLOSER TO MEMBERS
                                the skuld claims handling function moved even closer to our members in 2007.
                                several years earlier the club had decentralised its claims handling by fully moving this
                                function into geographically-based syndicates that have all the necessary resources
                                and staff to effectively help our members and be closer to them. over the course of
                                2007 we took this process a step further by decentralising both defence services
                                and casualty response functions, fully integrating them with the other syndicate

                                A major incident can strike anyone anywhere. our casualty response system is a
                                distributed and flexible organisational tool for dealing properly with the very crucial
                                early stages of a major event. the casualty response team’s main objective is to
                                assist skuld and our members to respond quickly and effectively. this has allowed
                                us to develop a lean and aggressive organisation that helps club members handle
                                claims in the best way possible. this change is being facilitated through active
                                internal training.

                                of the 160 staff members in skuld today, over a third are lawyers, approximately
                                20 have seafaring experience, and many have long and extensive practical
                                experience working in skuld. over the years, we have recruited maritime lawyers
                                from jurisdictions that are most important to our members’ trading patterns. we
                                currently employ lawyers with degrees from 14 different jurisdictions – truly an
                                international approach to claims handling. our latest additions to the list are
                                lawyers with backgrounds from singapore, germany and ukraine.

                                in addition, we take extra steps to improve communication between skuld and our
                                members. we have begun to use our members’ vessels as a training ground for our

skuld annual review 2007
AnnuAl review 2007              new claims handlers – we send out lawyers for several days with stops in at least
                                two ports so they may experience discharge and loading first hand.
       Adding vAlue
                                KNOWLEDGE MANAGEMENT TOOLS
   Key Figures 2007
                                skuld’s staff is supported by our sophisticated tools for monitoring and assisting
       ceo’s report
                                in claims handling. these also provide a rich database for assessing risk and
 chAirmAn’s report
                                facilitating loss prevention. skuld is developing strategies for retaining and
                                expanding its knowledge management and human capital base.
  risK mAnAgement
   clAims hAndling
                                we are further developing our standard surveys for vessels joining the club so
 humAn resources
                                that they may be entered electronically into our main business system. this means
                                that exactly the same information is maintained for each vessel – allowing us to spot
                                trends, identify deviations and provide fast feedback to our members on specific
                                cases. At the touch of a computer key, knowledge may be transferred to all our
                                syndicates so we may learn from each other’s experience and build our institutional

                                Using the experience gained from a number of recent high profile cases, we are
                                able to serve members wherever and whenever the need arises. in addition, we
                                hold periodic team meetings with all claims handlers to gain crucial balance
                                between local responsiveness and global integrated action.

                                CLAIM DEVELOPMENTS

                                reports from the media over the past years indicate that claims costs are on the
                                rise in parallel with the booming shipping market. we in skuld do not see this as a
                                sharp trend, but instead see that the claims/gt ratio has remained fairly stable over
                                recent years. we have, however, observed a slight increase over the past year. we
                                also see a clear trend for costs per reported claim to increase faster than inflation. It
                                is therefore critical to keep the frequency of claims low in order to avoid increasing
                                our members’ costs. we will be placing an even greater focus on this area in our
                                loss prevention work.

                                the increased cost per claim trend is evident when looking at the pool statistics.
                                the total cost for claims on the pool are continuing at a dramatic level. At present,
                                the 2007 year is looking to be the second most expensive claims year in the history
                                of the pool after the record year in 2006. we consider that the increase is partly due
                                to human error, which leads to many collisions and groundings. when performing
                                our pre-entry surveys for new members, we will therefore continue to focus not only
                                on the ship’s hardware but also the “software” onboard and onshore.

                                today about one–third of our members have selected to combine their p&i insurance
                                with skuld’s defence insurance. Although the premium volume for this product is
                                rather limited, the service provided is an additional bond in building a long lasting
                                relationship with our members – one of our primary service goals.

                                As in previous years, the types of cases handled by the Association in 2007 were
                                varied, cutting across the spectrum -- from the usual freight, demurrage and hire
                                matters to crew disputes, to disputes on newbuildings, and broker and insurance
                                issues. the majority of cases concern charterparty disputes on both voyage and
                                time charters.

                                THE FUTURE
                                our biggest challenges for the future are attracting quality tonnage to skuld and
                                successfully retaining and recruiting the most talented service staff. with that in
                                mind we have launched a scholarship to assist students who would like to pursue
                                a career in shipping. we will also continue to increase the competence of our staff
                                by focusing on further training – at sea, in the class room and through practical

skuld annual review 2007
AnnuAl review 2007                Following the successful opening of our Hamburg office in 2006, we are now
                                  following up on the significant growth in the German market by upgrading the
      introduction                Hamburg office to a full fledged claims office. This will enable us to respond even
       Adding vAlue               more quickly in the german market, as well as better assist other members when
   Key Figures 2007               calling german ports. this move continues the skuld ethos of being close to our
       ceo’s report               members.
 chAirmAn’s report
      underwriting                In 2008, we will see even more opportunities for enhancing our service, with the
  risK mAnAgement                 further development of a fully electronic claims system.
   clAims hAndling
 humAn resources

                                  OWNERS COST/GT





                                      2003       2004     2005   2006   2007
                                        TRENDLINE (ALL)

                                  POOL CLAIMS – TOTAL NET POOL COST
                                  / AS OF FEBRUARY 2008







                                  0          1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

skuld annual review 2007
AnnuAl review 2007

       Adding vAlue
   Key Figures 2007
       ceo’s report
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
 humAn resources                HUMAN RESOURCES: A three-year strategy focus

                                Skuld is focusing on three main Human Resources areas over the next three
                                years: Values & Culture, Reward and Recognition Systems and Competence
                                Development. The importance of this project cannot be overstated. Our vision of
                                being the New Generation P&I Club demands that we attract, develop and retain
                                top people who have the competence and the willingness not only to continue to
                                learn, develop and grow in our organisation, but also to support such growth in
                                their colleagues. This energy and endurance supports the fast, professional and
                                personalised service our members have come to expect.

                                skuld’s focus on strategic human resources is aimed at renewing our company
                                culture in line with our vision of being the new generation p&i club – in other
                                words, living our brand. the importance of these efforts cannot be overstated. our
                                vision demands that we attract, develop and retain top talent with the willingness
                                and capacity to learn, develop and grow the organisation.

                                our strong company culture drives performance and positive behaviour. As an
                                organisation, we are only as good as our people, so building a positive company
                                culture is helping us to meet future business challenges. our corporate values
                                constitute the building blocks in our company culture and provide us with an
                                understanding of how to prioritise the day-to-day challenges in skuld.

                                the main factor in developing a positive organisational culture is our leaders’
                                ability to lead – at all levels. in reality, our leaders are our cultural architects. ideally,
                                their way of leading creates motivation, loyalty and increased acceptance of change
                                – and provides motivation for greater achievement. we are therefore placing special
                                focus on leaders and offering them the extra support they need to implement the
                                results of a cultural survey we will be running this autumn. we are also developing
                                a customized, value-based leadership development programme that will be
                                launched toward the end of the year.

                                TOTAL REWARD AND RECOGNITION PROGRAMME
                                we are currently working to establish an overall system for reward and recognition
                                for the various employee groups in skuld, based on strategic targets. the system
                                is designed to be well-structured, flexible and fair, as well as to support desired
                                cultural and organisational behaviour. the reward and recognition programme is
                                also being designed to promote a clear and consistent grade system that supports
                                clear career paths.

                                Finding new ways of sharing and developing knowledge is a crucial element that
                                supports skuld’s key competencies. An internal competence and education (ice)
                                group in skuld, which already arranges for relevant experts to give lectures on
                                strategic p&i topics, will continue. reference groups in each knowledge area
                                meet on a regular basis to share information and discuss ways to promote further
                                development. these efforts are being supported by the development of plans for

skuld annual review 2007
AnnuAl review 2007              general pathways for competence development – performance appraisals planned
                                for this fall will develop individual paths for everyone in the club.
       Adding vAlue             the above processes will help to structure the further development of the personal
   Key Figures 2007             energy and endurance that supports the fast, professional and personalised service
       ceo’s report             that our members have come to expect.
 chAirmAn’s report
  risK mAnAgement
   clAims hAndling
 humAn resources

skuld annual review 2007
skuld (gjensidig)
ruseløkkveien 26
no-0251 oslo
P.o. Box 1376 vika
no-0114 oslo

Tel +47 22 00 22 00
fax +47 22 42 42 22

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