You would be forgiven for thinking that yacht insurance premiums should be on the way down after a year of stifled sailing activity. But don’t hold your breath. Broker after broker tells me that the industry is still facing catch-up after years of aggressively low premiums, and warns of further ‘corrections’ ahead. All is not lost, however, and there are ways of trimming premiums, especially where usage has been curtailed by Corona.
Rising premiums have been the story of the last few years, especially in the yachting market. Some $215bn of damage inflicted by three hurricanes in 2017 cost the insurance industry around $140bn in cover, and it has been on the back foot ever since. Add to that year of undervaluing risk in order to win a prestigious superyacht business, and it all adds up to a nasty mix. The specific insurance risk posed by British cruising yachts may not have increased, but the declining resources of the insurance industry mean that they are charging more.
“The market correction [of 2019/20] wasn’t enough and insurers can’t rely on reserves or investment income, nor does there appear to be any near-term hope of doing so,” says Greg Hill at family-owned broker Trafford's, which has covered sail, motor and narrowboats since 1959. “This means that insurers have to aim to make a profit every year, which historically can be difficult as all the premiums in the past could be wiped out by one or two big claims.”
Covid has made a bad situation worse. In fact, the Chairman of the Lloyds of London insurance market warns that current losses are in line with the catastrophic losses of 2017. Lloyds is already paying out over £5bn in Covid related losses. Since then that figure has only risen.
It all matters because the big insurance underwriters that cover our boats are also exposed to losses on health, events, and in business continuity policies. As the Lloyds spokesman tells me: “Covid-19 will impact across the market and classes of business.”
Not everyone agrees. Mike Wimbridge, MD of Pantaenius UK, says that it’s likely that there will have been fewer 'bumps and scrapes' to boats due to lighter use during lockdowns. “I don’t see those insurers who are looking to raise premiums using Covid as their primary rationale for doing so,” he adds. “But many policies have been underpriced in recent years.”
Ian McManus, Managing Director of Noble Marine takes a nuanced view: The yacht insurance market has been a challenging place for insurers to make a profit in recent years and some insurance providers are highly likely to be increasing rates in 2021.
For most of those with relatively straightforward requirements, the increases are likely to be quite modest however at the other end of the spectrum, the cover may be difficult to obtain at reasonable terms. If you find you are falling into the second category, I recommend that you speak to providers as they should be able to help you understand what’s causing the issue, and if they cannot help they will usually be able to point you in the right direction.
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