US Terrorism Insurance Legislation 22 November 2002 No.02-013 This legislation is likely to come into effect on the 28th November 2002 and could have very serious consequences for shipowners and their Clubs. To avoid such consequences, when the Act comes into effect you will receive a notice to pay a substantial amount of premium if you wish to take advantage of the additional cover provided under the Act. If you decline to pay the premium your cover in respect of terrorism will  continue as at present. You will find attached a circular which explains in more detail the reasons why this step has been taken. No.02-013 22 November 2002 US Terrorism Risk Insurance Act The United States is introducing legislation the intention of which is to ensure that insurance companies extend to their clients cover for terrorist acts in the United States on the same basis as existed prior to the 11th September 2001. Under this legislation the Federal Government will provide an indemnity of up to 90% of incurred losses. Unfortunately, the way in which the legislation has been drafted requires insurers to reinstate the level of terrorist cover available prior to 11th September 2001 by providing that insurers must offer terrorist cover to the same extent and limit as is offered for non-terrorist risks. In the case of P&I Clubs cover is currently provided for war risks (including terrorism) up to a limit of $200 million subject to an excess equivalent to the ship's proper hull and machinery value. For non-war risks the limits are significantly higher being $1billion for pollution risks and approximately $4.25 billion for other P&I risks. We are therefore faced with a situation whereby the legislation will require P&I Clubs to provide cover in respect of terrorism up to these higher limits albeit with some degree of indemnity from the US Government. This risk would not be poolable nor would it be covered by reinsurance. The legislation has been agreed by both the House o