Soft Market Hits Yachts, Boat World

By Andrea Wells

The insurance market for yachts is good with rates staying flat or even slightly decreasing. Competition in this highly specialized market is growing as more capacity opens up, according to specialists in the space.

“All the carriers are trying to grow right now,” said Noah Wheeler, senior broker, marine, for Burns & Wilcox. “We’re seeing rates decrease on both property and liability, so most of my liability renewals, as long as the exposures remain the same, I can pretty confidently expect flat [renewals].”

Wheeler said he’s even seen a few accounts with decreasing rates at renewal. “The days of automatic 10% to 15% increases are definitely behind us,” he said.

Rob Carron, Aon Private Risk Management’s superyacht practice leader, sees the same softening trend on his accounts, which primarily includes clients who own superyachts valued at $10 million and higher.

“For clean risks, meaning no claims, underwriters are giving flat to very small percentage increases this year,” Carron said. That’s a change from the past several years. “Back in 2018 and onward, we saw some hefty increases following losses due to big hurricanes,” he said. “We saw constriction in the market, capacity shrunk, and changes in underwriting requirements,” he said. “But now we’re starting to see more capacity enter the market.”

Carron said the market for yachts valued between $5 million and $10 million is seeing more capacity as well, even in the South Florida area where wind coverage dried up a few years ago. “Markets are starting to enter back into South Florida and the Southeast areas, those more hurricane-prone areas.”

Both Wheeler and Carron said the less active CAT seasons over the past two years have helped carriers’ books, driving better results for the yacht market. But tighter underwriting is likely to remain.

Changes made to underwriting terms and conditions will likely remain. “The underwriting around some of these vessels and requirements in terms of hurricane plans is really emphasized now even on the larger yachts,” Carron said. That can include requirements regarding where the vessels are docked during hurricane season.

‘The underwriting around some of these vessels and requirements in terms of hurricane plans is really emphasized now…’

“Awareness of where the yachts are during hurricane season in the hurricane-prone areas, and whether they’re in a shipyard during that time and unable to move [should a hurricane develop],” are important considerations now, he said. “There’s just a greater emphasis on that today.”

Other risks such as piracy and war risks have always played a role when yachts move into certain international waters, Carron said. “Especially when we have yachts that are transiting in the Red Sea and the Gulf of Aden, there’s an increased piracy risk there, and those areas may have piracy excluded for those transits,” he said. “So, clients that would need to transit those areas may have to buy back that excluded area coverage subject to certain requirements being met,” he explained. Those requirements might include heightened onboard security, other security measures, and purchasing kidnap and ransom coverage for crew members.

Carron said as war risk in the Middle East continues to evolve, there may be other changes ahead. “What we’re seeing now is that capacity still remains there, but underwriters are taking it on a day-by-day basis.”

The softening insurance market can also be seen in the smaller vessel area.

Wheeler said after the 2021 hurricane season, almost no carrier would write wind coverage for personal watercraft in Florida. That is no longer the case.

“After COVID there was a boating explosion–a lot of boat sales,” he said. “We started writing a ton of personal watercraft (which traditionally was through the standard markets). “But this year we’re finally starting to see some of that business slowly moving back to standard markets,” Wheeler said. “We’re seeing a lot more wind options in Florida, a lot more carriers popping up with new yacht programs.”

But that is what the excess and surplus lines market is for, he added. “Now, I’m still going to stick to what we do best, which is commercial marine and marine construction.”