NOTES TO PRO FORMA FINANCIAL STATEMENTS

1. The accompanying statements have been prepared for illustrative purposes only. They do not represent a forecast or

estimate of future results.

2. It has been assumed that premiums will be paid at a rate of $300 million per year by shipowners. No increase in premium rates has been provided for despite inflation in expenses, clean up costs or the incidence of losses. In the two years following a loss, the insured party incurring the loss will pay 150% of normal premium; it is assumed here that the additional premium will be between $1 million and $2 million per year. Although premiums will be paid on a per voyage basis, it is assumed for these purposes that all the premiums will be paid at the beginning of the year and that $225 million will be fully earned in the first year. This data does not reflect amounts expected to be paid as deposit premiums which would be in addition to regular premium amounts.

3. Administrative expenses have been shown at $5 million in the first two years, increasing to $13 million in the eighth due to expanded size, claims administration and inflation. Organizational expenses are not projected separately. If paid by the company they would be amortized as part of the administrative expenses. It is assumed that the company will not be subject to

tax.

4. The company would issue bonds for $2.0 billion prior to the first year of operations. Interest on the bonds is assumed

to be 7%.

5. The company is presumed to earn investment income of 7%, net of investment expenses, on its investment base (total assets at beginning of the year, plus premiums, less interest on the bonds, less administrative expenses).

6. In the no loss scenario, the company will be able to begin redeeming bonds at the end of the fifth year and to retire all bonds after the eighth year.

7. The loss scenario assumes losses of $1 billion in the first year and another loss of $1.5 billion in the third year. Losses could consist either of guarantee payments that are not recoverable or of insured losses in excess of the P&I Club coverage. These losses would be fully reserved in the year of occurrence and paid out partially at the end of the first full year following the loss and the rest at the end of the second year. In this case, the company would not be able to redeem bonds during the period illustrated.

UNITED STATES MANDATORY EXCESS INSURANCE FACILITY ACT OF 1993

To require additional pollution insurance for tank
vessels carrying oil as cargo engaged in the foreign
trade of the United States and charter a nonprofit
corporation to provide excess insurance not available
in the private market to meet that requirement.

Sec. 1. Short Title. This Act may be cited as the "Mandatory Excess Insurance Facility Act of 1993."

Sec. 2. TANK VESSEL POLLUTION INSURANCE REQUIREMENTS.

The Ports and Waterways Safety Act (33 U.S.C. 1221 et seq.) is amended by adding at the end a new section 15 as follows:

"SEC. 15. TANK VESSEL INSURANCE REQUIREMENTS

" (a)

INSURANCE REQUIREMENT. The person owning, operating, or demise chartering a tank vessel over 10,000 gross tons engaged in the foreign trade that is carrying oil in bulk as cargo or cargo residue shall maintain insurance, in accordance with regulations promulgated by the Secretary, to pay losses for oil pollution damage in the amount of up to $2,000,000,00 per occurrence if the vessel-

"(1) uses any place subject to the jurisdiction of the United States; or

"(2) uses the waters of the exclusive

economic zone to transship or lighter oil destined for a place subject to the jurisdiction of the

United States.

"(b) MANDATORY EXCESS INSURANCE FACILITY.

"(1) Charter. The Secretary shall charter a

private, not-for-profit, mutual insurance

corporation to provide-

" (A) insurance required under this

section; and

"(B) evidence of financial

responsibility required under Sec. 1016 (a)

of the Oil Pollution Act of 1990 (33 U.S.C.

2716) and the Comprehensive Environmental Response, Compensation, and Liability Act of

1980 (42 U.S.C. 9601 et. seq.).

"(2) Name, Status, Authority and Purpose.

Except

as otherwise provided in this section, the corporation shall be-

"(A) known as the Mandatory Excess Insurance

Facility;

"(B) a government-sponsored enterprise as defined in section 622 (8) of title 2, United States Code;

" (C) subject to the District of Columbia Nonprofit Corporation Act and authorized to exercise the powers conferred upon a not-forprofit corporation by that Act; and

"(D) limited to the purposes set forth in

this section.

"(c) BOARD OF DIRECTORS.

"(1) Composition.

The board of directors shall