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Old 10-26-2019, 05:29 PM   #18
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City: Fort Lauderdale
Country: USA
Join Date: Jan 2014
Posts: 17,489
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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