ASSURANCEFORENINGEN GARD -gjensidig- Annual report and accounts for the year to 20 February 2015 Assuranceforeningen Gard - gjensidig- Table of content The Board of Directors and the Supervisory Committee 2 Report of the Supervisory Committee 3 Report of the Board of Directors 4 Income statement 9 Balance sheet 10 Cash flow analysis 12 Comments and notes to the accounts 13 Auditor’s report 63 Assuranceforeningen Gard - gjensidig- The Board of Directors and the Supervisory Committee The Board of Directors Trond Eilertsen, Chairman, Oslo Tadeusz Niszczota, Deputy Chairman, Polish Steamship Co., Szczecin Ian Beveridge, Bernhard Shulte, Hamburg Morten W. Høegh, Leif Höegh (UK) Ltd., London Jane Sy, Stolt Tankers B.V., Rotterdam Rolf Thore Roppestad, Managing Director, Arendal The Supervisory Committee Stephen Knudtzon, Chairman, Oslo Helge Aamodt, Bergshav Management AS, Grimstad Claus Mørch, Anders Wilhelmsen & Co AS, Oslo Arne Falkanger Thorsen, Oslo 2 3 Assuranceforeningen Gard - gjensidig- Report of the Board of Directors INTRODUCTION The Board of Directors hereby submits the report and accounts of Assuranceforeningen Gard - gjensidig - (the “Association” or the “C ub”) for the 2014 financia year, covering the 12 month period to 20 February 2015. This is the Association’s 10, th year of business. In the opinion of the Board of Directors this report and accounts for the year to 20 February 2015 gives a true and fair vie. of the Association’s assets, iabi ities, financia position and resu t. Statutory minimum re0uirements .ith regard to technica reserves and so vency margins, are comp ied .ith. Further, the Association has at the ast years’ rene.a s achieved the budgeted genera premium increases. Beyond .hat has been dea t .ith in this report, and the ris1s and uncertainties the marine insurance industry in genera are faced .ith, the Board of Directors does not consider there to be any specia ris1s or uncertainties connected to the business activities of the C ub. THE ASSOCIATION - MEMBERSHIP RIGHTS The Association is a 2or.egian mutua insurance association founded in Arenda in 130,. The Association provides Protection and Indemnity (“P5I”) insurance and re ated insurance products to its members being o.ners, operators, charterers or other direct insurers of ships entered in the Association. As a mutua insurance association, the C ub is o.ned by its members. There are no e6terna capita o.ners. The members of the C ub are a so members of Gard P. 5 I. (Bermuda) 7td and vice versa. Reinsurance agreements have been entered into .hereby the t.o associations are reinsuring each other. As to the tonnage entered in Gard P. 5 I. (Bermuda) 7td and reinsured in the Association, the former in its capacity as the reinsured has been given the right to e6ercise membership rights in the Association on the basis of the reinsured entries fu tonnage. This means that Gard P. 5 I. (Bermuda) 7td contro s the vast majority of a 8ember votes at the genera meeting of the C ub giving the Bermuda association the po.er to contro and govern the business of the Association. Against this bac1ground the C ub is treated as a subsidiary of Gard P. 5 I. (Bermuda) 7td for accounting purposes. THE OPERATION IN GENERA P5I insurance Protection and Indemnity (“P5I”) insurance is the name of the insurance covering the shipo.ner’s iabi ity to.ards a third party. The insurance covers both iabi ity for property damage and persona injuries arisen in connection .ith the operation of the insured ships. Traditiona P5I insurance is current y offered by 13 g oba insurers covering about 30 percent of the .or d’s merchant f eet. These 13 c ubs, or mutua insurance associations, have formed an organisation ca ed the Internationa Group of P5I C ubs (the “Group”). One of the most important functions of the Group is to co-ordinate the c ubs co ective purchase of mar1et reinsurances. This is done .ithin the frame.or1 of the so-ca ed Poo ing Agreement. The atter contains three main e ements. The first is the c aims sharing bet.een the parties to the agreement. The second is the provisions dea ing .ith co ective purchase of mar1et reinsurances covering iabi ities in e6cess of the upper imit of the Poo . The third is the provisions governing a c aim e6ceeding the imit of the Group c ubs co ective mar1et reinsurance contract, a so-ca ed overspi c aim. The Association’s branch office in To1yo The Association has a branch office in To1yo. The branch office has one emp oyee and .as estab ished severa years ago as a conse0uence of the Association being granted a icence from the Japanese 8inistry of Finance to insure vesse s f ying Japanese f ag. The Association’s branch office in Hong Kong The Association has a branch office in Hong Kong. The branch office has been authorized by the Office of Commissioner of Insurance to carry on business in or from Hong Kong. Gard AS - the Association’s insurance agent The Association has entered into an agency agreement .ith Gard AS being a 2or.egian registered insurance intermediary. Gard AS is registered .ith the 2or.egian Financia Supervisory Authority as the agent of the Association. A under.riting and c aims hand ing service offered by the Association are performed by Gard AS or its subsidiaries abroad as insurance intermediaries on the basis of the agency agreement. Personne and organisation As a resu t of the appointment of Gard AS as the agent of the Association there are at the end of the year on y 13 persons emp oyed by the Association. These persons inc ude, inter alia , the 8anaging Director, the 7ega Director (Company Secretary) and the Accounting 8anager. In the period 20 February 2015 the eve of absence due to sic1ness has been s ight y be o. the corresponding average in the insurance industry. The organisation is focusing on preventing occupationa injuries as a resu t of ong 4 time use of PCs and other office e0uipment. There have been no injuries or accidents in connection .ith the operations. The Association’s objective is to promote gender e0ua ity, ensure e0ua opportunities and rights, and to prevent discrimination due to ethnicity, nationa origin, descent, s1in co our, anguage, re igion and faith. The .or1ing environment in the Association has in the period to 20 February 2015 been good. Interna contro Pursuant to regu ations determined by the 2or.egian Financia Supervisory Authority (Finansti synet) the Association has estab ished an interna contro system. In accordance .ith the said regu ations a report about the interna auditor's findings is submitted to the Board of Directors once a year. In ine .ith the ne. So vency II regime a Comp iance Officer function has been estab ished .ith effect from 1 January, 2015. The Comp iance Officer is part of the ris1 assessment and interna contro system and sha ensure comp iance .ith governing a.s, regu ation and administrative provisions. Pursuant to the 2or.egian Insurance Activity Act of 2005 no. 44, Section 5-10, the Association sha have an Audit Committee. Ho.ever the Association has been granted dispensation from the re0uirement to have an Audit Committee by the 2or.egian Financia Supervisory Authority. The e6emption .as made on the basis that the parent company of the Association, Gard P. 5 I. (Bermuda) 7td., has an Audit Committee overseeing the activities of the Gard on a conso idated basis, inc uding the activities of the Association. The decision by the authorities .as a so made on the basis that the composition of the Group Audit Committee is in ine .ith the re0uirements of 2or.egian egis ation both in re ation to its composition as .e as responsibi ity to perform certain tas1s. Safety at sea The Association is participating in the activities organised under the umbre a of the Internationa Group .ith a vie. to revie. possib e measures to be ta1en by insurers for the purpose of improving safety at sea. The 2or.egian Act on Ship Safety, .hich entered into force on 1 Ju y 200, a o.s e6change of information bet.een insurers regarding the technica condition of vesse s. The Association be ieves that this is an important step for the purpose of improving the safety at sea. Research and deve opment The Association does not carry out research and deve opment activities. Environmenta damage The operations does not po ute the environment. FUND MANAGEMENT Since 1 August 200A, a major part of the Association’s investment portfo io has been invested through a “Common Contractua Fund” structure. The investment structure represents a common ega frame.or1 for the management of the funds be onging to Assuranceforeningen Gard - gjensidig -, Gard P. 5 .I (Bermuda) 7td, Gard 8arine 5 Energy 7imited, Gard 8arine 5 Energy Insurance (Europe) AS, Gard Reinsurance Co 7td and Safeguard Guarantee Company 7td. The objective of the investment structure is saving of management costs and optimizing the tota returns .ithin the investment guide ines. The portfo io managers in the Common Contractua Fund structure are a specia ists .ithin the c ass of assets the individua manager has been given a mandate to manage. The genera investment guide ines for the management of the funds of the Association are determined by the Board of Directors. The genera guide ines determined by the Board of Directors contain, inter alia , provisions as to the currency composition of the investments and the types of financia instruments that can be used.