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Old 10-25-2019, 08:15 PM   #1
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Vessel insurance update- Fall 2019

2019 has seen lots of changes in the stateside marine insurance arena- some good, some challenging. Programs are tightening up their underwriting criteria or simply electing to no longer offer marine coverage. Most of these changes can put the insured in tough situations, as companies are non-renewing customers on short notice or requiring navigation changes that limit the insurerís risk- and itís tough to insure an older vessel with a 5+ year old survey, or larger vessels with owner/operators.
Itís always a good practice to have your vessel surveyed regularly, especially if the boat is over 10 years of age. Iíve always recommended that a boat be surveyed every other regular haulout (here in Seattle, we haul out every 2-2.5 years) so the survey remains relatively fresh.
  • Companies exiting the market completely- Brit RE, American Reliable, Ironshore, Tradewinds. If youíre insured with one of these companies, expect to receive a non-renewal notice.
  • Premier Marine has severely curtailed their appetite to vessels no older than 25 years of age as of 11/01 (I believe). If youíre with Premier, I strongly recommend you get your vessel surveyed soon so you can have the policy shopped.
  • various London syndicates have pulled back on their Caribbean/offshore navigation offerings.

Just food for thought- I know insurance isnít sexy or high tech, but it is an important component or our pastime to consider.

Pete
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Old 10-25-2019, 09:05 PM   #2
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Appreciate the update! Can't wait to see what my renewal looks like next month.

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Old 10-25-2019, 10:22 PM   #3
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Thanks for the update Pete!
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Old 10-25-2019, 10:59 PM   #4
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Vessel insurance update- Fall 2019

My policy is non-renewing. They said they lost their Lloyds reinsurance.

To make it scarier, my current policy ends on 11/7 and I have an open claim from my hurricane Dorian damage.
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Old 10-25-2019, 11:17 PM   #5
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Originally Posted by cardude01 View Post
My policy is non-renewing. They said they lost their Lloyds reinsurance.

To make it scarier, my current policy ends on 11/7 and I have an open claim from my hurricane Dorian damage.
Your current claim should be covered, as the damage occurred while the policy was in force. The challenges are:
  • Getting the carrier to extend coverage until the claim is closed
  • Getting a new survey to place the coverage elsewhere post repair
  • Finding a new carrier for your vessel
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Old 10-25-2019, 11:37 PM   #6
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Thanks for the information, Peter...it is very important!
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Old 10-26-2019, 01:25 AM   #7
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I've seen a noticeable uptick of demanding survey recommendations (some quite minor) be addressed either within 30 days or before a policy will be issued.
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Old 10-26-2019, 01:44 AM   #8
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Vessel Insurance Update Fall 2019

Quote:
Originally Posted by Pau Hana View Post
2019 has seen lots of changes in the stateside marine insurance arena- some good, some challenging. Programs are tightening up their underwriting criteria or simply electing to no longer offer marine coverage. Most of these changes can put the insured in tough situations
Is there a particular reason? These things have a habit of spreading...
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Old 10-26-2019, 06:51 AM   #9
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Bruce
Peter is the guy on TF to provide the facts to your question. My carrier has a ready answer, boats in hurricane country. TF threads over the years have been replete with finding hurricane holes, survival stories, storm decision making and marinas in harms way.

Add to the storm losses the increasing complexity and cost of boats, lack of sufficient operator licensing and more lenient drug laws it is no wonder companies are exiting the marine insurance business. The list is long but it really comes down to follow the money.
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Old 10-26-2019, 10:35 AM   #10
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There should be a law that requires insurance companies that want to sell insurance in a particular state that would require them to offer all insurances health, vehicle, House, boat etc.. Instead of letting them just cherry pick the most lucrative.
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Old 10-26-2019, 10:45 AM   #11
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Is the issue that is scaring away insurance companies liability or hull coverage? I would think modifying deductibles would solve a lot. Example: 50k on hull and 10k on liability.
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Old 10-26-2019, 12:28 PM   #12
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Quote:
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Is there a particular reason? These things have a habit of spreading...
Bruce (and others)- the reasons are manifold, but it boils down to a number of factors:
  • The storm seasons of the last few years
  • Marine insurers with inadequate/no reinsurance for CAT events
  • Marine insurers that did not properly price risks for the exposure, undercutting the market
  • Marine insurers that steeply relaxed underwriting criteria, and allowed junk to be insured (and the resultant claims)

Just to name a few. (CAT= catastrophic storm/event)

Example- Falvey Insurance cornered the bareboat fleet market in the BVI by offering extremely inexpensive policies, and expanded this coverage (private pleasure and commercial/charter) for risks based in the Bahamas, Caribbean, Mexico, and other CAT locations. When an owner of a Lagoon catamaran is offered a quote at 40-60% less than their current policy, it is indeed tempting. After Hurricane Irma devastated the USVI, BVI, etc., followed by Hurricane Maria, Falvey turned in $70M of losses and shut their yacht and charter operations.

This (and other similar storm related losses) have led to the current market.

Bud- having laws that require an insuring company to offer all lines of coverage in a given state would lead to more complications- namely, more risks not being properly vetted. Each line has its own unique underwriting criteria, and its hard to believe that Kaiser Permanente would be able to properly vet a marine risk- or me, a health insurance risk. Such a law could make the market even more volatile.

Mark P- I believe that it's both hull and liability exposures. Currently, deductibles apply only to partial hull losses- total loss deductibles and liability losses (damage to others) incur no deductibles (hull coverage does incur a wind deductible for a total loss from a named windstorm).

Something to think about- many insurers consider making .04-.-6 cents of the dollar as profitable.

I think the markets will continue to tighten their underwriting requirements for the near future, including survey requirements, reducing exposures, and more.
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Old 10-26-2019, 12:33 PM   #13
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Quote:
Originally Posted by Pau Hana View Post
Premier Marine has severely curtailed their appetite to vessels no older than 25 years of age as of 11/01 (I believe). If youíre with Premier, I strongly recommend you get your vessel surveyed soon so you can have the policy shopped.
This was who I had last year, but not moving forwards because of their change to 25 years or newer. A shame because I liked them, but I found someone else.

Did create a bit of a scramble, but I had a recent survey so I was OK.
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Old 10-26-2019, 03:38 PM   #14
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Been tried. A number of companies just chose to leave the state, reducing overall competetion.

Quote:
Originally Posted by Bud View Post
There should be a law that requires insurance companies that want to sell insurance in a particular state that would require them to offer all insurances health, vehicle, House, boat etc.. Instead of letting them just cherry pick the most lucrative.
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Old 10-26-2019, 03:40 PM   #15
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Something to think about- many insurers consider making .04-.-6 cents of the dollar as profitable.
Excellent point. For all the arm-waving and yelling about rich insurance companies -- well, margins are better in a lot of other businesses.
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Old 10-26-2019, 04:35 PM   #16
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In Australia our premium with the big P went from $1500 to over $10,000.
Never made a claim.
They reckon that it was Lloyd's pulling out of the market and Berkshire Hathaway/Chubb stepping in and was for vessels over 18m (we are 18.3) no matter what the construction material.
Forced to go 3rd party, rather spend the $10k on extra maintenance.
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Old 10-26-2019, 04:51 PM   #17
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Insurance companies do have smal margins because they do not put any money up front. They collect the premiums, invest them and use that money for any payouts or claims. If the claims are more than expected they raise the premiums to accommodate it.
It's no wonder that Warren Buffet, the Sage of Omaha, invested so heavily in the insurance sector, buying Geico and opening its own insurance firm, Berkshire Hathaway Reinsurance Group.
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Old 10-26-2019, 05:29 PM   #18
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Quote:
Originally Posted by Pau Hana View Post
Bruce (and others)- the reasons are manifold, but it boils down to a number of factors:
  • The storm seasons of the last few years
  • Marine insurers with inadequate/no reinsurance for CAT events
  • Marine insurers that did not properly price risks for the exposure, undercutting the market
  • Marine insurers that steeply relaxed underwriting criteria, and allowed junk to be insured (and the resultant claims)

Just to name a few. (CAT= catastrophic storm/event)

Example- Falvey Insurance cornered the bareboat fleet market in the BVI by offering extremely inexpensive policies, and expanded this coverage (private pleasure and commercial/charter) for risks based in the Bahamas, Caribbean, Mexico, and other CAT locations. When an owner of a Lagoon catamaran is offered a quote at 40-60% less than their current policy, it is indeed tempting. After Hurricane Irma devastated the USVI, BVI, etc., followed by Hurricane Maria, Falvey turned in $70M of losses and shut their yacht and charter operations.
This isn't something new or unique to the marine market. We've seen property insurance carriers do this in the Caribbean before, then a hurricane came through and none of them would re-insure. Florida periodically has companies try to increase their property insurance and then a bad year and they try to run, although the insurance commission in Florida has been tough in the past. The real money for the largest general carriers is in auto insurance and the insurance commissioner has used that for leverage.

Even one bad storm has impacted availability and rates in the past. However, this time the insurers see a trend they fear. You look at the last three years and the pattern of catastrophic hurricanes and as an insurer, you no longer project based on long term history, but now you project based on this short term trend.

Even those like Lloyd's got greedy and many of their syndicate members were hurt and have pulled out. In turn, it seems long time customers are somewhat protected but limited for new customers and some of those who were fairly recent.

I always get scared of those buying their way into a market. When you're 40-60% below the market like Falvey was, it's a cause for concern. You have to either believe all the other insurers were wrong, were charging double what they should have been, didn't know the market, or you have to conclude Falvey is crazy. Yet, even if you believe they're crazy, is the deal too good to refuse. Well, typically something too good to refuse is dangerous. Still, I can't fault the logic of anyone who went with them, even knowing it wasn't likely to last.

Pau Hana has made the recommendation of regular surveys. I would love to hear any other recommendations he has for consumers and boat owners.

I've always felt loyalty to a carrier had benefit, but I'm not sure that's as much as I have believed. I'd love to hear his view on that.

I've also heard having multiple lines with one insurer is beneficial but I'm not sure that's very practical or beneficial on boats. One problem is that for most of us our boat insurance is our most expensive insurance. An interesting thing true in my case and I'd think in most cases though is that as a percentage of value, we pay more for auto insurance than for boat insurance. Then more for boat insurance than home insurance and more for home insurance than commercial insurance. So it looks like Auto>Boat>Home>Commercial.

I've always felt some protection over insuring through one of the largest insurers of that type insurance and hope that's still the case.
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Old 10-26-2019, 09:09 PM   #19
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How do home built boats fit into the insurance scheme? I'm building to USCG standards as outlined in their home builders guide and AYBC. The boat will be USCG documented and registered in my state, SC. The boat will be USCG inspected and also surveyed. I'd like more than just liability but I will go with that to get on the water.
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Old 10-26-2019, 11:37 PM   #20
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Quote:
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Insurance companies do have smal margins because they do not put any money up front. They collect the premiums, invest them and use that money for any payouts or claims. If the claims are more than expected they raise the premiums to accommodate it.
It's no wonder that Warren Buffet, the Sage of Omaha, invested so heavily in the insurance sector, buying Geico and opening its own insurance firm, Berkshire Hathaway Reinsurance Group.

Makes no sense.
If the margins are so small why would he see it as such a stellar investment?

If the margins are so small why did ours go up 700%?
All BH have done with their corporate greed in my instance is scare us away.
They were getting some of our money but now they are getting none.
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