According to various sources, the fire that broke out in the floating dock of the Lürssen shipyard in Bremen-Aumund, which included significant damage to the 100m-plus superyacht within it, is expected to trigger an insurance pay-out in the region of €600million.
It has been suggested via various social media channels that the superyacht in question is 140m Project Sassi, which was due to be launched within a number of weeks from the accident. However, the yard is yet to confirm which project was affected by the blaze. According to one source, the Lloyd’s market reserved the loss at €600m as of 3 October.
As was reported on the Yacht Harbour website, the insurance policy for the new build project began in October 2014 with QBE, an Australian insurer, Lancashire Insurance, RSA, Atrium and Beazley all potentially in the mix for large pay outs ranging from €27million to €70 million.
“The Lürssen loss is going to be in the range of €600million to €700million and it is going to have a profound effect on the market,” explains one industry insider. “The insurance market was already within a period of pre-turmoil and a number of businesses were already pulling out of the market. Since this period, there has been a 40m fire, the grounding of a superyacht around 60-something-m superyacht and now the Lürssen loss. When this loss has been realised, it will be the largest marine loss since the Costa Concordia incident in 2012.
"When this loss has been realised, it will be the largest marine loss since the Costa Concordia incident in 2012"
“This is going to have a large effect on the market, full-stop. For the very large yachts there is going to be what is known as a ‘capacity risk’. With a number of insurers required to pay out in the region of €20million to €50million, future policies will have to be properly rated or the underwriters simply won’t write the insurance. There is a large Lürssen on the market at the moment that is now paying in the region of three times more than another large Lürssen of equivalent size earlier this year.”
It must be noted, however, that this is not a Lürssen issue. According to industry sources, especially in light of recent events, it is not uncommon for new policies being written to cost double what they did just a couple of months ago. “We are seeing significant movement,” comments a second industry insider. “But, we need significant movement because the rates that were being offered previously were unsustainable.”
It is no secret that the superyacht insurance market has been in a state of flux in recent months. In August 2018, SuperyachtNews reported that no fewer than seven Lloyd’s syndicates had left the market as Lloyd’s prepared to start rejecting business plans if a return to profit was believed to be unfeasible on the part of certain syndicates. This followed a number of years where the Lloyd’s superyacht insurance market had been operating at an unsustainable loss ratio, culminating in a loss ratio of 180 per cent in 2017.
"It is important not to look at the market correction as a massive spike, rather it is reversing back to where we were five years ago"
“The market is going to be a lot tougher moving forward, conditions are going to be different, prices are going to be different. But, it is important not to look at the market correction as a massive spike, rather it is reversing back to where we were five years ago. In real terms, certainly over the last 10 years, has dropped around 70 per cent at a time when everything else in yachting is going up in cost. We need to climb back to the level where it is sustainable,” concludes market insider one.
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