Article by Claire Griffiths CHANGE WITH THE TIMES THE WORLD OF SUPERYACHT INSURANCE IS CHANGING RAPIDLY. LLOYDS SYNDICATES ARE CLOSING, AND GENERAL CORPORATE POLICIES ARE BEING CONSIDERED. A SUPERYACHT IS LIKE A SMALL BUSINESS WITH A VERY GENEROUS TURNOVER AND FOR INSURANCE PURPOSES SHOULD BE TREATED AS SUCH There was much ado about the sighting of a possible short fin mako (Isurus oxyrinchus), or a great white shark (Carcharodon carcharias) off Mallorca this summer and marine scientists were cock-a-hoop with the discovery. Overfishing, accidental catches in nets, discarded fishing gear and the delicacy of shark fin soup in China and Hong Kong have diminished stocks to critically dangerous levels. We celebrate the sighting of these great fish in our waters, but it might remind us that we really don’t want any holes in our insurance nets when it comes to the (or ‘a’) crunch and insurance sharks start circling to find gaps in your agreements. Follow the advice of the insurance experts who tell us how to get the best bang for your buck and knit up the cover nice and tight so that you sleep easy at night. Who specialises in what? What kind of insurance do you need? What is often overlooked? All risk or named perils? And new perils? Claims experience and claims handling? These are questions you need to find the answers to. Luckily, we have some of the answers right here. Brokers Seippel and Seippel are specialists in all yacht insurances. For sail, they insure everything from sail racing classics, round the world cruisers, to day sailors; and for motor yachts they cover luxury yachts, captains and crew, to day motor boats. As brokers they work with various companies according to the needs of the owners and vessels. CEO and founder, Phillip Seippel believes the risk of overlooking yacht insurance issues has improved, learning from oversights in previous years. But, that said, machinery break down and underwater extensions such as propellers can sometimes be overlooked on some policies. He adds, “Another subject to make sure is covered are owners’ personal effects. Most policies do not cover them unless specially mentioned.” Hugo Jacquot is Yacht Team Leader at Steamship Mutual Steamship Management Services Ltd. The company specialises in Mutual Protection & Indemnity insurance or P&I Insurance and covers the Marine Liabilities that arise from the ownership and operation of a yacht. It also provides Kidnap & Ransom and Hull War Risks insurance for yacht owners. When it comes to choosing an insurer, don’t just go for the cheapest, advises Jacquot, especially now when many insurers are pulling out of the market. He says, “It is easy to find a very cheap insurance cover but the most important question that owners should ask themselves is ‘What will happen when a claim arises?’” Jacquot has a check list of questions he suggests owners consider: Is the insurance cover provided answering all my needs? What is excluded? Is the insurer selected committed to the yacht industry? Have they got a dedicated yacht claims team? Am I confident that the liability insurer I have selected is an established company that will still be around in 5-10 years’ time to pay my claims? What is the insurer’s reputation and their place in the insurance market? Make sure the insurer has proven financial strength (S&P rating A) and a track record in underwriting yacht business. Says Jacquot, “If an owner is buying insurance from an MGA which writes on behalf of and relies on a mixture of insurers, he will need to make sure that each of those insurers remains committed to the yacht market.” Burr Taylor is a founder of Sturge Taylor, specialist in luxury yacht insurance. Its focus is on larger and more complex risks. Until recently most insurance packages adequately addressed the risks associated with vessel ownership and operation according to Taylor. But that’s changing. Now he sees a weakness when it comes to ‘corporate’ type risks; Cyber, Employment practices, Directors and management liability, Fidelity etc. The type of risks that any company with the size and turnover of a large yacht would usually have has not generally been included within an all encompassing yacht policy. More on that to follow, but should you choose an All Risk policy or a Named Perils one? Phillip Seippel is quite clear about this: There are no disadvantages to a true All Risk Policy. But is the policy really All Risk? “That is why using an experienced broker is essential. When coverage is written on a named peril basis, the burden is on the insured to prove that one of the named perils caused the loss. Hence we prefer using the All Risk Form. An all-risk or open peril policy covers everything except what is specifically excluded in the policy,” explains Seippel. Taylor at Sturge Taylor agrees but points out that an all risks policy with rigid conditions/ exclusions may not be better than a broad named perils form.
CYBER RISKS ARE AND SHOULD BE THE TOP PRIORITY OF YACHT OWNERS AS NUMEROUS COMPANIES IN THE YACHTING INDUSTRY HAVE BEEN HIT BY CYBER ATTACKS
But is the policy really All Risk? “That is why using an experienced broker is essential. When coverage is written on a named peril basis, the burden is on the insured to prove that one of the named perils caused the loss. Hence we prefer using the All Risk Form. An all-risk or open peril policy covers everything except what is specifically excluded in the policy,” explains Seippel. Taylor at Sturge Taylor agrees but points out that an all risks policy with rigid conditions/ exclusions may not be better than a broad named perils form. There are countless jurisdictions and registration considerations when it comes to insurance, but recent specifics to look out for include the way The Maritime Labour Convention is being applied by some flag states warns Jacquot. It has be creating new challenges for yacht owners in France for example and will continue to change the way crew employment is handled onboard yachts: Recall that the Maritime Labour Convention (MLC) provides a set of comprehensive rights and protection at work for seafarers and aims to achieve minimum on board working conditions covering a wide range of matters, including working hours, health and safety, crew accommodation, seafarers’ welfare and seafarers’ contractual arrangements. The world spins and we roll with it, adjusting and adapting as we can. New risks arise, and we need to be ready for them. Says Seippel, “Cyber Risk is very much a concern on larger luxury yachts, as is security. Cyber Risk can be covered by insurance. For security, we recommend using specialised companies to advise on security issues. Having the best third party liability insurance is also important.” Drones are certainly more and more common on board yachts. For now some yacht insurers accept them under their yacht’s insurance policy as ‘equipment’ of the yacht, others exclude them categorically. Says Jacquot, “As drones increase in size and range, one could wonder whether yacht insurers will ultimately leave the insurance of drones to aviation underwriters in the same way that they leave helicopter insurance to them: food for thought…” Cyber Risks are and should be the top priority of yacht owners these days because numerous companies in the yachting industry have been hit by cyber attacks. Insurance cover is available and should be purchased by yacht owners advises Jacquot at Steamship Mutual, but the best protection is loss prevention. Loss prevention materials are often available from the insurers that offer Cyber Risks cover. So if, by remote chance, right now, the owner is sitting sipping a Negroni on the back of the boat as the sun slips down towards New Zealand, and he is contemplating his insurance…. what should he be thinking? Well, Mr Taylor at Sturge Taylor recommends ensuring that you have an insurance that will respond in a satisfactory way when you have a big loss or liability bearing in mind that you might be only one party in a catastrophic loss event. Review the latest terms and conditions available every year and make certain that the values declared are accurate and that the yacht’s use and areas of navigational are well defined in the policy offers Phillip Seippel. And, as far as you can, make sure the insurers who will be paying your claim will still be around in 5-10 years to pay, liability claims are often paid over a long period of time. Drink in this wisdom, then take another sip: Let the world whizz round getting madder by the minute…. you’ve checked your insurance net for holes, and there’s no stitching to be done just yet. WATCH THIS SPACE In August, Brit Global Speciality, Lloyd’s syndicate 2987, ended its yacht insurance business lines. Experts are expecting announcements of more marine syndicates pulling out of the yachting market in the coming weeks and months. Superyacht insurance is currently viewed as the biggest loss maker on the Lloyd’s Marine Portfolio. After months of falling premiums and unsustainable loss ratios, Lloyd’s is tightening its belt and the yachting industry is very much in it’s sights. ‘Buck up or shut down’ was its message to the marine insurers. But what’s not to like about boats? It’s not about the boats, it’s the marine insurers, stupid. Simply put, the pool of money used to pay out claims has not been big enough because underwriters haven’t been charging enough to cover the losses that have occurred: over capacity in the insurance market and competition are said to be the reasons. Other factors include severe damage from the hurricanes in Florida and the Caribbean last year, and reportedly two high-profile 100m plus yacht claims. Lloyds recently demanded lagging marine syndicate businesses to come up with a decent business plan, but some now say it will drop loss-making enterprises, regardless of business plans. Some businesses are choosing to leave before they are pushed. The coming weeks and months will reveal the extent of the fallout.
All washed and no where to go, some Lloyds syndicates are closing their marine divisions, but what does this mean for yacht owners?
