In the light of a spate of recent yacht fires, The Superyacht Owner asked Pantaenius Yacht Insurance to clear up some of the ramifications surrounding the issue.
How much is total loss due to fire covered in standard yacht insurance policies?
Unfortunately, fire is one of the most common reasons for total losses. As far as we know, every standard policy therefore includes coverage for a total loss due to fire. However, policies often get amended or brokers decide to delete certain paragraphs. Owners who are not sure should get their policy checked. It is very unlikely, though, that a policy excludes fire.
Can you talk about some of the difficulties that arise from the subject of ‘“agreed value’” on policies?
Valuation in general or the basis of the so-called ‘“agreed value’” are issues that everybody who plans to buy insurance should take a closer look at. Policy wordings often include seemingly resilient terms that but turn out to be insufficient when it comes to a claim. If the agreed value, for example, is based on the market value of the vessel, the owner will most likely experience an unpleasant surprise when a total loss occurs. In the worst case, it will cost the owner a significant amount of money because the market value of his vessel can be significantly lower than what he actually paid. To evaluate the proper market value of an individual superyacht is a highly difficult undertaking and will most likely be unreliable. Owners should therefore rather look for policies with an Agreed Fixed Value based on the replacement value of the yacht. This concept of agreed value puts the owner in the same position as he was before the claim, and consequently he will be able to buy a similar yacht in the same condition as he had before the incident.
In your experience, what are some of the factors that lead up to a total loss due to fire?
There is a long list of possible factors but we are regularly witnessing defects of the electrical installations on board that cause a fire. The reason is often that electrical equipment is installed without sufficient space and the ventilation is not adequate or properly designed. especially in the engine room where this is an obvious problem. Fuel canisters for tenders and toys should always be stored in ventilated rooms as well. The volatile fuel can create fumes that ignite easily. Neglected maintenance of all electric installations is a possible problem as well. Owners who want to cut down on costs should never consider saving money at the expense of their own safety. Depending on the size of the ship, the pantry, galley or kitchen provides a certain potential for fire as well. Gas stoves, for example, need to be checked on a regular base basis to prevent defects.
One of the biggest problems we discovered is that alarm systems such as smoke detectors are sometimes very basic and work pretty slowly. This can reduce the crew’s time to react significantly, even if they are on board. Of course, having enough qualified crew on board is a major requirement in matters of fire prevention. There are often dozens of yachts lying tightly together in marinas without enough, or any, crew on board. If one yacht catches fire, it is very likely that two or three other vessels will be damaged as well.
The full story appears in the print edition, issue 21, out this month.