SYNDICATE AGREEMENT OF THE ARAB WAR RISKS INSURANCE SYNDICATE - AWRIS

PREFACE

In accordance with the decisions of the first urgent meeting of the Arab Insurance & Reinsurance Companies in the Arabian Gulf area which took place in Baghdad on 18th & 19th August 1979 and the second emergency meeting of the above mentioned companies in Baghdad on 12th December 1979 to establish a Marine Cargo & Hull war risks insurance syndicate, and the decision of the Dubai meeting on 8th April 1980 to form a Technical Committee to study the details of the project, approach the International Insurance Market in this regards and submit its report to the General Assembly on 1/7/1980 The Insurance & Reinsurance Companies signed below, which will be hereafter referred to as "Member Companies", have decided to constitute this project and name it :

And the English name shall be :

" Arab War Risks Insurance Syndicate "

Which will be hereafter referred to as " The Syndicate "

This Preface forms part of this agreement.

ARTICLE ONE

THE SYNDICATE’S OBJECTIVE

The Syndicate's objective is to protect the interests of the Arabian insurance markets in the Arabian Gulf area and the other Arab regions, in respect of the Marine Cargo & Hull War Risks etc... and the other insurance branches which shall be determined by a General Assembly resolution.

ARTICLE TWO

THE LEGAL STATUS OF THE SYNDICATE

The Syndicate shall be an independent entity and shall have its own duly documented financial status, and shall be fully liable for its obligations within the limit of its assets.

ARTICLE THREE

THE MEMBERSHIP

The Membership of The Syndicate is open to Insurance & Reinsurance Companies which are registered as national companies in any Arab Country.

ARTICLE FOUR

THE ACTIVITIES OF THE SYNDICATE

1- The Syndicate shall deal with insurance of War Risks, Strikes, Riots & Civil Commotion ...etc. which shall be referred to hereafter as, War Risks, regarding Marine Cargo & Hull and other Insurance sections, which shall be decided by a General Assembly Resolution.

2- Regarding the Hull War Risks which shall be included in The Syndicate's activities, the Vessels Should have a Flag of one of the Arab Countries, or owned and operated by an Arab Person or Entity or Government, or has an interest in it. The Syndicate may accept insurances concerning Vessels, other than the above mentioned, sailing within or outside the mentioned area.

3- The geographical scope of The Syndicate shall be Worldwide.

ARTICLE FIVE

THE ISSUANCE OF THE INSURANCE POLICIES

The Insurance Companies issue the Insurance Policies for the risks which will be ceded to The Syndicate according to the conditions, within the limits and at the Premium Rates provided by The Syndicate.

ARTICLE SIX

CESSIONS TO THE SYNDICATE

The Member Companies cede all the Risks and Premiums to The Syndicate, which will pay back to the Member Companies Treaty & Profit Commissions at a rate higher than the rate of their existing Treaties, which will be determined by the Technical Committee. The Syndicate shall be liable to pay the claims as an Independent Entity.

ARTICLE SEVEN

PARTICIPATION IN THE SYNDICATE

The participation of each member Company shall be worked out as follows :

1- The Cargo & Hull and other insurances Premiums ceded by each Member Company during the previous year, shall be totalled.

2- Each Member Company decides its own share in the Syndicate's Priority for all the transactions of the year. Each Member Company's share in the Syndicate's Priority should not exceed 20% of its estimate of the premiums mentioned in item (1)

3- The Member Companies shares shall be added up and their total is the Syndicate's Priority.

4- Each Member Company's share in The Syndicate shall be figured out on the basis of its share in the Syndicate Priority.

5- The Member Companies may select to participate in The Syndicate with a participation higher than 20% provided that, this higher participation should come from the shares of other Member Companies which decide to have participation lower than 20% In case more than one Member Company selects to have a lower participation in The Syndicate, the excess share shall be distributed on these Member Companies proportional to their participation in The Syndicate.

ARTICLE EIGHT

REINSURANCE

The Syndicate shall reinsure the portfolio surplus to the Priority accordingly. And shall protect the retentions of the Member Companies in group covers, if needed. The retention of each Member Company is its net obligation, and may not reinsure any part of it outside a group cover arranged by The Syndicate.

ARTICLE NINE

GOVERNMENT SUPPORT TO THE SYNDICATE

The Technical Committee shall set up the insurance premium rates according to Technical basis, and the Governments may request the application of lower premium rates in order to support the consumers and the marine transport market; however the Governments should reimburse The Syndicate with the difference. In extraordinary situations, if The Syndicate cannot provide war cover and the Governments insisted that it does so, and then the latter should guarantee all the obligations of The Syndicate.

ARTICLE TEN

THE INCEPTION AND EXPIRATION OF LIABILITY

The Syndicate's obligations Start at the same time with the obligations of the Member Company, and the obligations of the Member Company which accepts a share in the priority, start at the same time with the obligations of The Syndicate, The obligations of both, The Syndicate & The Member Company, expire at the expiry of these obligations.

ARTICLE ELEVEN

THE MANAGEMENT STRUCTURE OF THE SYNDICATE

The management Structure of The Syndicate consists of the following:

A) The General Assembly

It consists of all Member Companies, and is the Highest Authority of the Syndicate, and has the following duties:-

(a) Selecting the Technical Committee Members and setting their remuneration.

(b) Laying down the general policy of The Syndicate, in particular the investment policy of the accumulated funds.

(c) Approving the Annual Financial Statements of Syndicate.

(d) Amending the Syndicate Agreement.

(e) Appointing the External Auditor of the Syndicate and setting their fees.

(f) Defining the classes of insurance with which The Syndicate can deal.

(h) Dissolving the Syndicate.

(I) Review and endorse the resolutions of the Technical Committee concerning the acceptance of new Members.

The General Assembly shall meet at least once a year upon an invitation by the Technical Committee and there shall be a Quorum if the majority of the Votes are present, otherwise, the meeting will be held the following day where Quorum will be established by the attending Member Companies. Proxy amongst members is permitted, however the number of votes held by single Member should not exceed five percent of the total votes. Resolutions shall be passed by the attendees’ majority, except for resolutions concerning the amendment of the Syndicate's agreement or, defining the classes of insurance with which the Syndicate can deal or, dissolving the Syndicate, where two thirds majority shall be needed for the resolution to pass.

The General Assembly can be convened for an extraordinary meeting by the Technical Committee or at the request of members representing one third of the Votes.

B) The Technical Committee

A) The Technical Committee consists of nine persons as ordinary members and two reserve members. The General Assembly will chose Eight members and two reserve members and the member companies from the Syndicate’s country of registration will chose the ninth member who should be a citizen of that country.

1- Each member of the nine Technical Committee members should be a member should be experienced in insurance and reinsurance, and employed by any of the member companies.

2- The technical committee will serve for three years, and in case the ordinary membership (other than the membership reserved for the country of registration) becomes vacant, the Technical Committee chooses one of the reserve members as a replacement. In case the membership of the country of registration becomes vacant the same procedure for choosing a replacement will be followed. And in any case the replacements will serve till the expiry of the Technical Committee term.

B) The Technical Committee performs the following duties:

1- Accepting new members, and in case of refusal of an application the matter will be presented to the next general Assembly for approval.

2- Suggesting the General policy of The Syndicate.

3- Setting up the technical guidelines of the Syndicate.

4- Determining the insurance rates, conditions, commissions and profit commissions.

5- Allocating the shares of the Member Companies in the Syndicate's priority.

6- Arranging the reinsurance covers.

C) The Executive Management

The Syndicate shall have its full time Executive Staff which shall be chosen and contracted with by The Technical Committee.

ARTICLE TWELVE

REINSURANCE PROCEDURES WITH THE SYNDICATE

Reinsurance Treaties shall be arranged to organize the relations between The Syndicate and the Ceding Companies, and shall contain clauses that regulate the way the statements of accounts, the loss notices and the payments should be handled.

ARTICLE THIRTEEN

THE RIGHT OF REVISION

The Executive Staff has the right to ask Member Companies to provide them with explanations and information regarding all what falls within the activities of the Syndicate, and also to have access to the records and documentation of the Member Companies relating to the business in question, provided that such access takes place at the Head Offices of Member Companies during official working hours.

Member Companies also have the right, in the same method which is mentioned above, to have access to the records and documentations related to the Syndicate which are held by the Syndicate's Executive Staff.

ARTICLE FOURTEEN

THE SYNDICATE'S PROFIT

The Syndicate shall distribute on its Member Companies 80% of its yearly profit and transfer the remaining 20% to The Syndicate's reserve account. Such transfer can be more than Twenty per cent (20%) upon a Technical Committee proposal and a General Assembly resolution.
The distribution shall be as follows:

1- The dividend, the profit transferred to The Syndicate's Reserve Account, the profit transferred to the Contingency Account, shall be split each year to two parts as follows:

(a) The Investment Income, realized from the investment of the accumulated funds in The Syndicate’s Reserve and Contingency Accounts.

(b) The Underwriting Profit, realized from The Syndicate's insurance transactions before allocating any part of it to the Contingency Reserve Account, plus any profit realized from sources other than those mentioned in the foregoing paragraph.

Under normal circumstances, the total of both parts, (a) & (b) shall be equal to the total of the fund transferred to the Contingency Reserve, plus the fund transferred to the Syndicate's Reserve, plus the dividend.

This distribution shall be in the same proportion for each of the above mentioned three parts.

2- Under normal circumstances, the yearly distribution of the profit realized from the first source, upon the Member Companies, shall be according to the share of each Member in both Reserve Accounts at the beginning of the year.

3- Under extraordinary circumstances, like the case of the withdrawal of funds from the Contingency or The Syndicate's Reserves, or both, during the year, the Technical Committee shall decide a fair way of distribution which agrees in principle, with the preceding.

4- The foregoing formula shall be implemented as from the 1987 Accounting Year of The Syndicate, and shall replace the existing formula, and shall be considered as a part of The Syndicate's Agreement and Articles of Association, as from the date it is confirmed.

ARTICLE FIFTEEN

ARBITRATION CLAUSE

All disputes and differences which may arise in respect of the interpretation of this agreement's Conditions or the implementation of its Articles are to be settled amicably. Failing agreement between the parties, they shall submit it to the decision of two Arbitrators, one to be named by each party within one month from the date of referring the matter to arbitration. The two arbitrators shall appoint an Umpire within two weeks from the date of naming the last arbitrator. If the arbitrators fail to agree upon the choice of an Umpire they shall refer the matter by a registered letter to the President of the General Arab Insurance Federation who shall name the Umpire within 30 days from the date of such notification by one of the parties.

The Arbitration Committee, chaired by the Umpire, shall meet within 30 days from the day the Umpire was appointed and should reach a final decision within 3 months of its first session.

Should a decision proves difficult to reach, the period of 3 months can be extended by the approval of both parties.

The seat of arbitration shall be in The Syndicate's country of registration, and the decision of the Arbitration Committee shall be final.

ARTICLE SIXTEEN

WITHDRAWAL

1- Should a Member Company wish to withdraw from The Syndicate, it should submit to The Syndicate a notice of withdrawal, six months before the 31st of December. The withdrawal then shall take effect as from the following 1st January, in which case the liability of The Syndicate shall continue, as well as the liability of The Member Company, for all the ceded business between both parties, before the withdrawal until the actual expiration of the original insurance policies, unless both parties agree otherwise.

2- The withdrawing Member Company's share of the accumulated fund in The Syndicate's reserves shall be settled, after one year from the date on which all the liabilities of The Syndicate which were assumed through the original Insurance policies before the withdrawal of the Company have expired. The Withdrawing Member Company shall receive half its share of the accumulated funds in the reserves, and the remaining half shall be settled three years after the expiry of all liabilities.

The withdrawing Member Company shall be entitled during the above period to earn interest at the prevailing rate, which will be paid to it after deducting the management expenses as decided by the Technical Committee.

ARTICLE SEVENTEEN

THE COMMENCEMENT OF THE SYNDICATE

The Syndicate shall start transacting business as from the First of January following the completion of its legal registration.

This agreement has been written in Kuwait

on 1st July 1980

18th Sha'aban 1400 H.