SUPERYACHT INSURANCE: HOW THE MARKET IS CHANGING IN 2019
Last updated: 08/02/2019
The world of superyacht insurance is experiencing rapid change, with a number of extreme events having a significant, long-lasting impact on the industry – and ultimately yacht owners, too.
A combination of Hurricane Irma, which caused widespread devastation in 2017, and a densely saturated market has catapulted the yacht insurance sector into a state of flux. It has had a chaotic effect at both the top and the bottom of the insurance chain: there have been never-before-seen insurance claims, wild fluctuations in premium levels and even an intervention from Lloyds, the industry’s governing body.
The question is: How will these changes affect yacht owners? What do they need to know to make an informed decision on the types of insurance they should take out?
With the help of Hugo Jacquot, yacht team leader at Steamship Mutual, we provide an insight into the latest trends within superyacht insurance and highlight the products that all yacht owners should strongly consider purchasing alongside their regular cover.
Superyacht insurance: Why is it changing?
The yacht insurance landscape is evolving dramatically. The state of play in 2019 is vastly different to the state of play in 2018 – and there’s a good chance that things may even look different in 2020. With that in mind, it’s important to understand what has caused this industry-wide shake up.
A couple of issues had been bubbling away beneath the surface of the industry for a couple of years, and they came to a sudden head as a result of Hurricane Irma in 2017. The fact this extreme, completely random weather event was a catalyst for such significant change in superyacht insurance underlines the importance of adaptability. The businesses involved in the industry are in the process of doing this, and it’s vital that consumers follow suit.
Hugo observes, “For at least 10 years there has been overcapacity within the yacht insurance market. A lot of Hull & Machinery [H&M] underwriters saw yacht insurance as an opportunity to increase their profit and entered the yacht market. The competition became fierce, the premiums reached unsustainable levels and many underwriters started to lose money year-on-year.
“On top of this, many insurance companies underwriting yachts in the Caribbean lost a lot of money after Hurricane Irma. This was one of the factors that triggered a reaction from the Lloyds governing body, to cut down on unsustainable insurance premium levels [including yacht insurance].”
It isn’t just the H&M market that is undergoing change; the Protection & Indemnity [P&I] market is also “seeing its share of changes” too.
“10 years ago only a few P&I providers were underwriting yacht business,” Hugo adds. “Nowadays there is a lot of competition, both from insurance companies with a P&I facility and P&I Clubs who are specialist mutual insurers in this line of business.
“Today we observe that P&I claims are more costly and are more frequent than they used to be. Although crew claims are the predominant claims category, we often see collision claims in marinas due to the increasing number of yachts, and the capacity in the more popular marinas being limited.
“We note that P&I providers have taken corrective measures to increase the premium levels, although not as drastically as on the H&M side. There are strong indicators that suggests some P&I providers offering yacht P&I insurance today will no longer do so in the months to come.”
What these changes in yacht insurance means for consumersAs Hugo explains, Lloyds’ noble and respectable attempts to increase H&M insurance premiums has not necessarily materialised as intended.
“The result was that at the end of 2018, many insurance companies pulled out of this market, leaving fewer underwriters willing to underwrite this type of business. The ones that remained in the market are increasing premium levels at renewal and for new business. Yachts with Caribbean exposure are the most difficult to insure and, generally, are the ones paying the largest premium increases.”
This, coupled with the anticipated continuation in change as far as the P&I market is concerned, has reinforced the care and due diligence that all consumers should carry out before committing to any insurance cover.
Hugo points out why his employers, Steamship Mutual, are among the businesses that uphold high standards in the industry.
“It is critical that yacht owners choose their insurers wisely. When it comes to P&I insurance for their yacht they should consider the benefits of a P&I Club that has been insuring vessels for over 100 years, such as Steamship Mutual. The quality of the claims service is also notably higher with a P&I Club as they are specialists in this class of insurance.
“A Club such as Steamship Mutual also benefits from a loss prevention team formed of ex-mariners who can share their knowledge with the Club and their Members.”
The future: The insurance products consumers should consider
We’ve discussed the types of changes the superyacht insurance industry has experienced in 2018-2019 and the affect this is having on consumers. But what about now? What should consumers be looking to do moving forward?
Our insurance expert Hugo Jacquot has compiled some helpful suggestions, outlining what yacht owners should look to do to ensure they are suitably covered in an industry that is ever-changing.
“There are insurance products that yacht owners should strongly consider in addition to the usual H&M, P&I and Crew Medical and Personal Accident insurance,” he says.
“High-net-worth individuals often have Kidnap & Ransom [K&R] policies to cover them and their family whilst ashore, however, yacht owners should check that these policies cover them whilst on-board their yacht and at sea. Furthermore, these K&R shore policies will hardly ever cover the owner’s yacht-crew members and the guests of the yacht. Yacht owners should consider buying a marine K&R policy.
“Cyber risks are also a very realistic threat nowadays with hackers targeting companies and high-net-worth individuals. Cyber risks are often excluded from insurance policies but there are solutions available for yacht owners. Steamship Mutual P&I Club can offer both Kidnap & Ransom and Cyber risks cover.”