The State of the Insurance Market
The market is changing and it is imperative that industry stakeholders understand how and why in order to protect the interests of superyacht UBOs…
More often than not, insurance, be it superyacht or otherwise, is seen as a necessary evil. That is, of course, until there is an incident, at which point your insurer quickly becomes your best friend. In recent years, the superyacht insurance market has gone through a significant period of change. After an unprecedented period of downward market pressure and race-to-the-bottom premiums, the market has begun to harden and premiums are on the rise.
On day two of The Superyacht Forum 2019, in a workshop called “State of the Insurance Market”, a panel of underwriters and brokers will explore how and why the market is changing and the challenges lying ahead for asset management and evolving usage habits.
“The insurance market in general, is hurting from a period of excess capacity, which has driven down prices – and the yacht market has been no exception,” starts Paul Miller, director of underwriting at Hiscox MGA, a partner of The Superyacht Forum. “In addition to this, there has been a number of substantial superyacht losses, especially over the last five years, and when you add them to the regular year-on-year losses, the market couldn’t sustain the pay-outs and has been losing money. When the HIM [hurricane Irma and Maria] losses occurred in 2017, that was the real trigger for change, and since then the market has changed rapidly.”
Since the HIM losses, the market for marine insurance, of which superyachts form only a small part, has shrunk dramatically with many businesses pulling out of marine across the board and many others cutting their losses on the superyacht market. As a result, there is now less capacity and competition, and prices are beginning to increase towards a more sustainable market position. Part of the emphasis during The Superyacht Forum will be to explain why this period of market correction is necessary. If, for instance, premiums remained unsustainably low, there would simply no longer be quality insurance available for superyachts.
“There was a lot of resistance to the correction to begin with - certainly in the last quarter of 2017,” continues Miller. “At that time there was still a number of businesses writing low premiums; it wasn’t until 2018 that we started to see more movement. From a London market perspective, this really started to change when Lloyd’s started to delve much deeper into the performance of certain lines of business and identify underperforming sectors – yachts were one of them. The market changed rapidly at that point because businesses needed to have their business plans approved by Lloyd’s in order to carry on doing business in the yacht market.”
The correction that ensued was not simply a premium correction, it equally related to coverage, deductibles, brokers’ commissions and so on. It is not, however, just the insurance market that is changing.
"It is an opportunity to listen to people’s opinions on how the assets and their owners are changing..."
“For me personally, this is part of what The Superyacht Forum is all about. It is an opportunity to listen to people’s opinions on how the assets and their owners are changing,” explains Miller. “What direction are we moving in terms of propulsion? How are designs evolving with regards structural glass? What elements of the build could be considered prototypes or elements of R&D? Where are owners taking their boats and how are we going to insure them?”
Perhaps rather naively, the lay conception is that once a superyacht is built, it will be insured, and hence forth, it can be used in any way the owner sees fit. The truth, however, is rather more complicated and part of The Superyacht Forum’s remit will be explaining to various market stakeholders the nuances of the insurance market. Because a lack of understanding can easily lead to a dissatisfied owner.
“How owners use their boats is changing,” continues Miller. “Owners want to go to unexplored areas of the world. We’ve had instances of owners wanting to take high-tech carbon-composite yachts to areas of the world where there are no companies capable of repairing the vessels for thousands of miles. It is as much to do with the infrastructure and supply chain than it is the vessel itself. The bottom line is, owners will either have to listen to what the insurance market is saying, or be prepared to absorb a larger proportion of the risk themselves.”
As well as the market’s health and the changing usage of superyachts, the State of the Insurance Market panel, including Miller, Matt Halpin (Lead Yacht), Mark Feltham (Willis Towers Watson) and Simon Ballard (CRS), will explore new risks and what can be done to stabilise and protect the assets themselves, in order to ensure that the ultimate beneficial owners are sufficiently protected by their policies.
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