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We all know yachts are
expensive—to buy, to maintain, and to repair. So it’s little
wonder that sensible folks with big investments in their boats protect
themselves with insurance to cover the cost of accident, liability, or
total loss. But there’s been a lot of talk lately in certain yachting
circles that some big insurance underwriters, unhappy with yachting’s
risk-versus-return equation, might leave the game and cast owners into
a sea of potential loss without a monetary life belt. Is this rumor true?
Will insurance for your boat soon be too expensive—or maybe even
unavailable?
For the benefit of those
readers who don’t like to read, have excitable natures, or are within
range of implements of self-destruction, I’ll skip to the bottom
line: Stop worrying—but be ready to spend more money. Insurance for
powerboats—and most sailboats, for that matter—isn’t exactly
in crisis, but premiums do cost more than last year and will likely cost
even more next year. That goes for cruising motoryachts as well as smaller
craft that stick close to the coast. Yes, some of the major players in
the yacht-insurance game have gone away—Royal SunAlliance, for one—and
others have raised the minimum value of yachts they’ll cover (Chubb’s
entry level is $1 million, according to one broker I consulted). Still
others, e.g., Zurich, are shying away from high-risk areas like Florida
and the Caribbean, where a single hurricane whacking into densely packed
marinas can cause millions of dollars’ worth of claims. Fewer players
means those who remain will be able to charge more; add the dubious returns
from Wall Street over the past few years (investments are the prime producer
of underwriters’ incomes), and you don’t have to be Alan Greenspan
to see why insurance companies are charging more for coverage.
But you can still buy
insurance. I spoke with several brokers in different parts of the country,
and none reported problems obtaining affordable coverage for well-found
motoryachts with experienced owners and/or crews. Sure, there’s always
the guy with three or four recent claims who’s refused new coverage,
but 99.9 percent of powerboat owners who want insurance can find it without
much trouble. If there is an insurance crisis, it primarily affects older
cruising boats whose owners want to make long passages with minimal crews,
often with minimal offshore experience. Boats left unattended for long
periods of time are also considered high risks. Oh, and should you tow
your tender while cruising, it might not be covered.
But if you think insurance
premiums are high today, you should’ve seen them in 1984, according
to Spencer Lloyd, a top broker with C. A. Hansen Marine Insurance in Fort
Lauderdale. “The industry is cyclical,” he says. “Rates
change. Premiums were actually higher 20 years ago per $1,000 of coverage—but
boats are worth a lot more today.” Lloyd also points out that marine
insurance now covers lots of things that underwriters didn’t have
to worry about in the past, like oil-spill coverage. “You can have
$75,000 of damage to electronics from a single lightning strike,”
he says. Megayacht owners often decorate their saloons and staterooms
with valuable art, too, and even the tender for a major yacht can cost
$100,000, meaning many insurers place restrictions on towing. “Tender
losses mount up. Some companies simply say, ‘No towing underway,’”
he adds.
The majority of boaters
spend most of their time near their home port, but might occasionally
take a longer cruise that takes them outside their insurance policy’s
coverage area. This is where the so-called insurance crisis rears its
head. But getting an endorsement for an ocean crossing or cruise to the
Caribbean isn’t really all that difficult, in Lloyd’s opinion.
“The key element is the condition of the vessel and the experience
of the crew,” he explains. There will usually be an additional premium,
and the insurer might require a survey and want the captain to have at
least two years’ experience on yachts of similar type and have made
a similar trip before. Aboard larger yachts, other crew members might
have to meet requirements as well, plus the insurer may specify a minimum
number of crew. “And the underwriter will want to know what you’re
doing during hurricane season,” adds Lloyd.
Next page >
Part
2: “It has to
do with individual risk. Obtaining insurance depends on the past experience
of the boat owner.” > Page 1, 2,
3
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