Yacht Insurance Market Continues To Change
Six months into a ‘hardening’ insurance market in the yacht sector all owners of yachts no matter the shape or size who have faced their renewals have been hit with substantially increased premiums and deductibles while seeing the breadth of the cover they had reduced with lower sub limits and more restrictions placed on them. For larger yachts the more experienced insurers are insisting on yachts being in Class and this is likely to hit Asian owned yachts hard as many yachts in the region have been taken out of Class in recent years. We have seen premiums increase up to 40% for yachts with no claims and some are finding it hard to find cover at all as insurers lose appetite for risks that even last year seemed normal as they face restrictions on what they are allowed to underwrite in order to try and stop the flow of losses hitting their books. While increased costs are not what anyone wishes to experience this change has been long foretold and, frankly, in order to produce a sustainable business with yacht insurance there needs to be a good few years of increasing premiums ahead to get things back on track. Premiums are still about a half to a third of where they were 20 years ago. The hope is, however, that while premiums are likely to continue to increase the significant changes to cover afforded and increases in deductibles seen will be sufficient for insurers. This all depends on how the yacht sector performs in the coming couple of years and whether the changes effected actually work.
Even though it is a shock to see premiums increase it should be remembered that for 20 years they have decreased with cover widening and deductibles lowering all the time. There had to be a point at which it stopped and began to turn. This said, insurance is still an extremely small cost aspect of owning a yacht and a major mistake for owners would be to move their covers to cheap alternatives simply based on the cost of what they are offered. We have seen several cases this year where owners have moved cover to a cheaper alternative to save a few thousand dollars on a multi million dollar asset without understanding the consequences of the move. In each case they have moved to an insurer with less of an understanding of yachts, cover that is significantly less and to a legal jurisdiction that will tie them up in knots in the event of a problem. Insurance is there to help you with a problem should it occur, there is no insurance more expensive than a cheap insurance that does not pay.
So, what can owners do to minimise the effects of the changing market? Things such as maintaining Class and employing good quality crew are important as are a good maintenance programme and regular surveys. Surveys are often seen as an expense owners do not wish to bear. In fact, they should be seen as excellent independent risk management and performed regularly as part of a yacht’s maintenance programme as preventative maintenance rather than waiting for something to go wrong and then fixing it. Its far cheaper, and safer, to find a problem while in the dock than out at sea. While this may not get you cheaper insurance in the current market it will go a long way to avoid insurers declining to offer cover at all. Many yachts have very wide cruising areas, restricting this to what is necessary can have an effect on premium and keeping a yacht in a professionally run marina with good security is far better than at anchor in a bay or commercial anchorage.
The hard market is likely to be with us for a couple more years yet. To achieve the best out of your insurance programme its advisable to use a specialist insurance broker with a solid understanding of the market who is able to give sound advice based on years of experience. To achieve more for the premium you pay why not try asking for risk management advice from your insurance broker and in turn underwriter and have them help you to do all you can to avoid a claim in the first place? That will help you and your insurers and will minimise future adverse changes to your insurance covers.
Expat Marine is here to help owners and those in the yacht industry with their insurance and risk management advice. With nearly 30 years specialist experience in the marine insurance market (22 of those specialising with yachts) including experience in dealing with a hard market (last really seen in the 1990’s), we are well placed to discuss terms of cover and give frank advice to assist towners and their crew. Colin Dawson can be contacted for further information at firstname.lastname@example.org
By Expat Marine