Yacht insurance: The state of play in the 2020s

My eyes usually glaze over just thinking about this, but a chance meeting with a yacht insurance broker whilst out partying the other day has given me some useful insights.

I was not out partying actually; well not at the time I met the broker anyway. I was just checking that you were still awake after reading the word ‘insurance’.

Before I start getting abusive e-mails from professional insurance brokers, the figures quoted in this article are educated guesses aided by some pretty exhaustive research. Okay, some research. As far as I know, there is no way of verifying them. So, take them as read, even if they are illustrative.

The state of superyacht insurance in 2021

In the good old days – I am talking way back to… I don’t know… 2018 – yacht insurance was ludicrously cheap. From an owner’s point of view it was not only inexpensive, but insurance brokers and underwriters could be played off against each other; it was hilariously good fun. A 1,000,000€ (c. £907,000) yacht would be insured for as little as 3,000€ – that is 0.003 of the yacht’s value. Included in the deal was a huge amount of cap doffing, forelock tugging and bottom kissing – an owner could benefit from an astonishingly high level of service from his chosen obsequious broker. You got a desk diary at Christmas, free pens, baseball caps and key rings, all conveniently branded so that you would not forget whom it was you had to belittle and abuse at renewal time.

The insurance brokers on the other hand had a horrible job: They had to pretend that they liked you, laugh at your jokes and then remind you at least 12 times to pay the premium in order to keep in with you. Yeah, those were the days. Life was good.

You see, way back then, insurers had at their disposal a lake of money available to underwrite your risk. Your 1,000,000€ yacht was a mere drop and owners of serious ‘big yachts’ and superyacht from the likes of Feadship, Lürssen and Amels could have even more fun with their hapless broker. Well not anymore. The tide has turned; there is a serious water shortage in the aforementioned lake. No more Mr. Nice Guy from the brokers – and this is why!

First off, I am having second thoughts about this lake analogy; so let’s try cake. Yes, cake!

There was a huge cake of cash that brokers and underwriters could access to support the risk. The yacht insurance market is worth 272,000,000€ in premiums annually and there was around 572,000,000€ worth of cake. Then there were a goodly number of substantial, eye-watering claims.

The fire at Lürssen – 580,000,000€, NERO falling over – 80,000,000€, the storms in the Western Mediterranean – 700,000,000€. Underwriters were beginning to lose their appetite for risk, let alone cake (this reference was shoe-horned in, but I think I got away with it). So most of them left; leaving three small slices which had finger marks in them and a burgeoning market demanding more cake (last one, I promise).

So the big players either completely withdrew or reduced their exposure.

So now the boot is on the other foot.The previously mild-mannered insurance broker now walks around town like a Stormtrooper on the Death Star and you have to see if you can get his attention without annoying him too much. He, in turn, will reward you for your attention with an exorbitant hike in the price of your policy. He now has the courage to tell you that you look older than you really are while you have to smile pretending that it is just ‘banter’ when you know full well that it isn’t.  Okay, maybe it isn’t quite that bad, but cheap insurance is issued on the understanding that your legal obligations are fulfilled but good luck if you have a claim.

I know of a number of cases where owners and managers are fighting over disputed claims. Never has it been so important to understand exactly what are buying.

Astonishingly, most insurance policies are bought on price alone – claims-weary owners and management companies may be more careful, but it is worth checking.

Your shipyard period, for example. Your policy may mention the minimum space between your yacht and the one parked next to it – the shipyard manager may have other ideas, so pay attention.

Agreed Valuation

I was asked recently to value a yacht by an owner. He had valued his yacht at 4,000,000€. The insurance company had said the maximum value they were ‘comfortable’ with was 3,500,000€ so the owner asked if I would value it, preferably at 4,000,000€.

I knew before setting foot on board that 4,000,000€ was too much. I had been party to a deal on a very similar yacht with similar specification which had sold for under 3,000,000€ only a few months earlier. The agreed valuation was only really useful to him in the case of a total loss, which is rare; the extra 1,000,000€ or so in its inflated value would simply cost the owner more in terms of premium.

If you want good insurance, which will be valid when you have a claim, then make sure you do your research. Some people, myself included, will refer you to a hand-picked selection of good (and suitably obsequious) brokers based on the size of your vessel.

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