Caution over low superyacht premiums
Superyacht insurance premiums are dropping while crew insurance is costing the same. We ask why…
“Insurance premiums for superyachts are being driven down, largely due to competition in the insurance market," says Nicola Kingman, yachts syndicate manager at The Shipowner’s Club. “There are more and more insurers and insurance brokers dealing with superyacht insurance, and this increases the competition in the insurance market to win the business, forcing the premiums down.”
For Jens Ploch, superyacht sales manager at Pantaenius Yacht Insurance, however, hull insurance premiums are generally calculated based on the value of the yacht and as these devaluate, the insurance premiums are also reduced. Therefore in a market state where supply outweighs demand, premiums may be being pushed lower.
“Additionally, many underwriters have found an attractive niche in the superyacht hull insurance market as claims ratios are generally low,” he adds. “However, when a serious claim occurs many of these underwriters are overwhelmed by the costs associated to yachting in general and the claims adjustment can be a long and complicated process for the customer.”
While premiums for the yacht asset may be dropping, the same cannot be said for crew insurance. Ploch believes this is down to what the market is offering in terms of crew insurance market is already very competitive. “A comprehensive, worldwide, 24/7 medical cover for around 100 euros a month is hard to find on the high street market,” he comments. “Here premiums are on the limit of what the claims ratio can justify so we don't expect to see premiums to drop further in the future.”
As a yacht liability insurer, The Shipowner’s Club considers crew to be one of the main risks on superyachts. “Our premium is not broken down to reflect the different elements of the cover we provide, but a large percentage of our premium could be attributed to the crew risk,” explains Kingman.
As well as crew liabilities, The Shipowner’s Club provides crew personal accident cover and, while the premiums for this cover have decreased slightly, they have not dropped to the same extent as the liability premiums. For Kingman, the main reason why crew premiums are not reducing as much can be attributed to the introduction of the Maritime Labour Convention (MLC), which applies to a large number of the world’s superyacht fleet.
“The MLC was brought in to try to bring the employment of seafarers more in line with shore based workers, for example ensuring that, where the MLC applies, all seafarers are employed under a seafarers employment agreement,” she says. “The MLC has also set minimum levels of compensation for seafarers, including, (but not limited to), their entitlement to sick wages and, with effect from January 2017, unpaid wages in the event of the vessel being abandoned.
“You can see, therefore, that the MLC has increased the extent of cover we are providing to crew, but also has resulted in the crew being more aware of their entitlements. This in turn means that the number and cost of crew claims has increased and therefore the premiums have to reflect this.”
Ploch agrees that more regulations regarding minimum crew coverage mean that underwriters will not be able to reduce the coverage below a certain level, even if they pursue a highly competitive business model. “Hull insurance in comparison is not regulated by flag states or international maritime law,” he explains.
“Although non-professionals might not recognise differences in policies at first glance, some of the existing providers simply cut down premiums by reducing the coverage and offered services. Simply put, significant drops in the premiums are dearly bought, usually at the expense of the quality owners receive.”
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