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 insurer’s risk- and it’s tough to insure an older vessel with a 5+ year old survey, or larger vessels with owner/operators.
It’s always a good practice to have your vessel surveyed regularly, especially if the boat is over 10 years of age. I’ve 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 you’re 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 you’re 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 isn’t sexy or high tech, but it is an important component or our pastime to consider.

Pete

Appreciate the update! Can't wait to see what my renewal looks like next month.

Ted

Thanks for the update Pete!

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.

cardude01 said:

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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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

Thanks for the information, Peter...it is very important!

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.

Vessel Insurance Update Fall 2019

Pau Hana said:

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

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Is there a particular reason? These things have a habit of spreading...

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.

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.

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.

BruceK said:

Is there a particular reason? These things have a habit of spreading...

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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.

Pau Hana said:

Premier Marine has severely curtailed their appetite to vessels no older than 25 years of age as of 11/01 (I believe). If you’re with Premier, I strongly recommend you get your vessel surveyed soon so you can have the policy shopped.

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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.

Been tried. A number of companies just chose to leave the state, reducing overall competetion.

Bud said:

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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Pau Hana said:

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

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Excellent point. For all the arm-waving and yelling about rich insurance companies -- well, margins are better in a lot of other businesses.

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.

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.

Pau Hana said:

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.

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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.

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.

Bud said:

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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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.

BandB said:

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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Other recommendations: as in real estate, location, location, location plays a huge part in the rating of a risk. Unfortunately, most of us cannot simply choose our mooring location, so a few other recommendations:

• Make sure your credit is good. Many insurers are using credit history as a major rating factor.
• USCG license- there is no requirement for vessel licensing. Obtaining your USCG ticket is not too easy, and takes time- and shows insurers that you take boating seriously. Generally, you will see a 10% premium reduction for having a USCG license.
• Review your coverages- Is your vessel properly insured? Are you carrying too much personal effects coverage, or endorsements that expired long ago?
  

ben2go said:

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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My experience is that you should be OK with a home built vessel as long as the plans were completed by a naval architect, and the vessel receives a comprehensive Condition and Valuation survey. You mention the vessel will be USCG inspected- is it being built to Subchapter T standards?

Pau Hana said:

My experience is that you should be OK with a home built vessel as long as the plans were completed by a naval architect, and the vessel receives a comprehensive Condition and Valuation survey. You mention the vessel will be USCG inspected- is it being built to Subchapter T standards?

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Thanks. I would have to look into that. I'm not sure if my USCG home builders guide has that. Thanks for mentioning. The boat will be recreational use only.

ben2go said:

Thanks. I would have to look into that. I'm not sure if my USCG home builders guide has that. Thanks for mentioning. The boat will be recreational use only.

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As an added hedge, you should be documenting your build process (photos, blog write up, etc) so any questions that come up as to build quality/methodology can be easily answered.

Peter, you talk about keeping surveys current, 5 years or less. Over the last few months I've surveyed 5 boats and had access to 2 other surveys. Seems like there is a big difference in price and quality of surveys. Good ones run $1200 or more and cheap ones $500 and don't include the mechanical stuff like engines and generator, etc. Does it make a difference on which type of Survey we should have ?

The Brockerts

The Brockerts said:

Peter, you talk about keeping surveys current, 5 years or less. Over the last few months I've surveyed 5 boats and had access to 2 other surveys. Seems like there is a big difference in price and quality of surveys. Good ones run $1200 or more and cheap ones $500 and don't include the mechanical stuff like engines and generator, etc. Does it make a difference on which type of Survey we should have ?

The Brockerts

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So true, Joe.

Unfortunately, there are no mandatory standards for surveyor- hence, there are many out there that simply hang a shingle and declare themselves a surveyor, regardless of their expertise or affiliation. The public at large is not aware of this, and too often select a surveyor based on price alone.

The best surveyors have affiliation with either NAMS or SAMS, in my opinion. I believe this because of the ongoing education requirements, accountability, and strict adherence to ABYC, NFPA, and USCG requirements. From my underwriting background, my fellow underwriters held the same viewpoint, and many insurers will only accept NAMS or SAMS surveys.

The survey type should be a Condition and Valuation survey (prepurchase surveys are usually C&V). This type documents the material condition and valuation of the vessel. If the vessel is of metal construction, the survey must be hauled and include an ultrasound/audiogauge report of the hull plate thickness. If of wood construction, the survey must be hauled, with a random sampling of fasteners removed and their condition (wastage and pinking) documented in the survey report.

BandB said:

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.

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We've just extended our normal navigation limits. Oddly, the carrier's next option from our typical Chesapeake coverage area is (usually) almost the whole eastern hemisphere... i.e., from Maine to Florida to Bahamas, etc. Would have thought they'd offer smaller selectable increments, but no...

And then this time there's also an additional endorsement: NO BAHAMAS, owing to Hurricane Dorian damage.

-Chris

Pau Hana said:

Other recommendations: as in real estate, location, location, location plays a huge part in the rating of a risk. Unfortunately, most of us cannot simply choose our mooring location, so a few other recommendations:


[*]Make sure your credit is good. Many insurers are using credit history as a major rating factor.
[*]USCG license- there is no requirement for vessel licensing. Obtaining your USCG ticket is not too easy, and takes time- and shows insurers that you take boating seriously. Generally, you will see a 10% premium reduction for having a USCG license.
[*]Review your coverages- Is your vessel properly insured? Are you carrying too much personal effects coverage, or endorsements that expired long ago?

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I was told as you indicate that USCG license and experience are being looked at more closely. I'm shocked frankly that our premiums are as low as they are but the fact there is always a licensed Captain on board helps, I'm sure.

You mention coverages and that first came up on our auto insurance that with our umbrella policy we didn't really gain by increasing the limits on our auto policy so I think looking at all coverage together is important. Similarly, we have a VPP policy to cover jewelry and art so don't depend on our homeowners or boat insurance to cover them.

We employ a risk manager so it's easy for us. How do you suggest most people make sure not just their boat coverage but all insurance makes sense for them?

ranger42c said:

We've just extended our normal navigation limits. Oddly, the carrier's next option from our typical Chesapeake coverage area is (usually) almost the whole eastern hemisphere... i.e., from Maine to Florida to Bahamas, etc. Would have thought they'd offer smaller selectable increments, but no...

And then this time there's also an additional endorsement: NO BAHAMAS, owing to Hurricane Dorian damage.

-Chris

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I wonder if your insurer realizes the futility of excluding areas the year after they get hit?

Certainly, a hurricane like Dorian is enough to change the historic numbers. Even if you're going on a long history, adding it in has an affect and increases the odds of loss. However, you still have to apply it as one year out of many, not as the norm.

BandB said:

I wonder if your insurer realizes the futility of excluding areas the year after they get hit?

Certainly, a hurricane like Dorian is enough to change the historic numbers. Even if you're going on a long history, adding it in has an affect and increases the odds of loss. However, you still have to apply it as one year out of many, not as the norm.

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Increasing exclusions for previously hard hit locales and/or adding cruising season caveats for hurricane areas seems logical for the insurers. As has been debated for the past few months on TF, owners make choices on hurricane acceptance or avoidance. As the hurricane area marine losses mount up, insurers make choices too.

sunchaser said:

Increasing exclusions for previously hard hit locales and/or adding cruising season caveats for hurricane areas seems logical for the insurers. As has been debated for the past few months on TF, owners make choices on hurricane acceptance or avoidance. As the hurricane area marine losses mount up, insurers make choices too.

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But following them is an exercise in futility. You're increasing your prices and eliminating areas always one year too late. Yes, more will come eventually. I understand raising prices to pay for last year's losses but you raise company wide. Their system only really works if a hurricane returns to the same locale very soon.

Yes, the decision for some insurers has been not to insure boats.