Times are changing. In the marine insurance world, there has been a shift in the underwriter’s approach to approving policies and their available coverage. Premiums are increasing and underwriters are asking more questions, resulting in a longer and sometimes more difficult insurance procurement process than it was just a few short years ago!
Why are the marine insurance waters suddenly choppy, making it difficult for yacht owners like you to obtain the coverage you need at affordable rates? As is the case in most markets, it boils down to supply and demand and, in the yacht insurance market, supply is drying up.
For insurance providers, the yacht insurance market is risky business with many factors contributing to the risk assessment process. Boat type, age, construction, power and drive type, owner’s experience, navigation exposures, exposure to hurricane and lightning, jurisdictional issues cruising between countries, etc. Premiums are set in advance based on predictions of what losses will occur. This is like asking a carmaker to sell a car without knowing how much manufacturing and distribution will cost until many years after the cars have been sold.
For years, direct insurers and reinsurers have provided more than enough space in their portfolios for the yacht insurance market, which makes up a very small slice of the global premium pie. Yacht programs were embedded within personal lines of insurance or commercial marine programs, and the profitability of these relatively small yacht insurance programs were often overlooked. Actuaries are using more sophisticated data analysis and modeling to review results of all insurance lines, including yacht insurance, and as a result - when the curtain was pulled back - it was revealed that yacht insurance programs had been unprofitable for years! Coverage changes and increased pricing were needed. Over a dozen yacht insurance programs have evaporated over the last few years causing reduced capacity, tighter underwriting, and higher prices for the remaining carriers in an effort to return to profitability.