“What happened to fun? Our insurance doesn’t cover it!”
– Charles M. Schulz, The Complete Peanuts, Vol. 16: 1981-1982
If you’re like me, you’re starting the new decade by reflecting on your life situation and making sure everything is on the level. It’s time to square up those bar tabs, renew those car tags, get mundane information straight for taxes, plan that boat haulout, and so forth. January is a dark, cold, rainy month around here anyway, so we might as well get this stuff out of the way to hit the ground running come spring and summer. Your boat insurance is probably on that short, or long, list of tasks somewhere, and to that we say heads up! Recent developments on the Pacific Northwest marine insurance scene are making certain boats—like performance racing sailboats and older yachts—harder to insure. This often comes to a head when owners go to renew their long-standing policy, only to find out that they are either denied outright or require a survey. Or worse, they suffer a big accident on the racecourse and insurance doesn’t cover them.
If this sounds familiar to you, you’re not alone. The market is moving in a direction with fewer Pacific Northwest marine insurance providers willing to take risks with some even getting out of the game entirely. To get a better idea of what the Pacific Northwest marine insurance scene looks like right now and why, we turned to Chris Gibbon, a Pacific Northwest-based marine insurance broker who has worked with Fournier Insurance Solutions for about a year and a half. He worked for Robinson Mauer for 23 years before that broker was bought by AAA Insurance.
NWY: So, you’ve noticed a change in the Pacific Northwest marine insurance game. What’s going on?
Right now, there are lots of changes in the industry. The markets are getting harder and the rates are going up with the markets becoming few and far between. Lloyds of London is getting the squeeze, not just in the pleasure boat market but also the megayacht market. There’s been lots of losses, and those take their toll.
For those who may not know, Lloyds of London is where the capital comes from. Lloyds backs most providers in the insurance marketplace. In one way, shape, form, or another, all roads pretty much lead back to their doorstep. Not all the companies, of course, but they are the source for
a lot of them.
NWY: What should boaters expect?
Boaters should expect some Pacific Northwest marine insurance providers to go out of business. Companies are raising rates and getting tougher on their underwriting criteria. Some of their problems is that their underwriters weren’t diligent enough about knowing exactly what the company was insuring, with the lack of current marine surveys being a part of the problem.
There are still plenty of good markets out there, but you just have to be able to find them. A broker will help you with that.
NWY: Sounds like underwriting, the process of evaluating risk and exposure for an insurance company, is especially important in the marine sector?
Underwriting is an important, not to be overlooked, part of insurance. Insurance companies need to be sure their clients are taking care of their property, and make sure that boats are being maintained. That’s where the survey comes into play. One change we’re seeing is that insurance companies will be asking for surveys every five or six years. Clients don’t always like getting surveys because, frankly, they’re expensive.
If you have a survey within about five years, you should be fine when it comes to renewing a policy and not needing a new survey. Increasingly, some companies want it within three years. But if you’re one of these boat owners who is not getting renewed, and you haven’t had a survey in 10, 12, 15 plus years, you’re going to have to get one. My suggestion to boat owners is to be proactive. If you’re going to do a haul out, you might as well try to time the survey with it.
NWY: Do you have any tips or resources you recommend for boaters looking for a marine surveyor?
The Society of Accredited Marine Surveyors website (marinesurvey.org) works great. I don’t have any secret tips with selecting a surveyor except to use the one you did before if he was good. The problem is that there isn’t a surplus of marine surveyors available as a lot of the professionals are starting to age out.
NWY: What does this current insurance climate mean for owners of highly specialized vessels, like racing sailboats or older yachts?
Not only are boat owners in a specialized sector of the insurance industry, but within boaters are owners of highly specialized vessels, like high-performance sailboat racers. Unfortunately, insuring higher risk boats like performance racing sailboats is getting more challenging by the day.
These racing sailboats have never been an easy risk for insurance companies. The problem is that when there’s a loss, like a de-masting, it’s sudden and expensive. Also, in such a small specialized market, when one incident happens, it effects the whole market on a local level. The underwriters may look at it and think, ‘What the heck is going on in the Pacific Northwest?’ If we’re having a lot of losses on the racecourse, it affects the bigger picture insurance wise.
NWY: If a boat owner doesn’t get renewed for their policy, are they just screwed, or do they have options?
Not getting renewed is not the end of the world. There are places to go, but they need to discuss it with their broker or call another broker. I’m always available even if it’s just for advice.
The key is to work with a broker who has marine experience. The marine experience is important because you need to understand what the risks are. You want somebody who reads the policies, understands the policies, and who can see if the coverages are right or wrong for the boat in question.
You need the right policy for the right risk. A standard boat policy is great for a little runabout to go around the lake and tow the kids on an inner tube. But a boat policy isn’t a good policy for a guy with a proper yacht with complex and expensive mechanical and electrical systems, etc.
NWY: Are insurance policies for a boat one-size-fits-all?
No, one size does not fit all at the end of the day. Our challenge is to find the right policy for the right boat.
NWY: Do you see insurers who don’t know enough about the marine industry and make mistakes?
Not too often, but instead what I see is that insurance providers just leave the boat insurance game altogether when they realize they are in over their heads. The big thing right now is that there is a huge chunk of the Pacific Northwest marine market that’s just not being renewed because a carrier is getting out of the business of doing business in the Pacific Northwest.
I look at it as an opportunity as a broker, but there are companies that don’t view it as an opportunity. There are still good markets out there. Our office represents 10 or 12 boat and yacht insurance carriers, so there are options. Some people won’t like their options with a rate increase potentially. It’s just a hard market right now.
NWY: Is there an end in sight for this Pacific Northwest marine insurance pinch?
We’re just getting started, unfortunately. With the boats that are not getting renewed, there is an end in sight. That cycle started August 1, 2019 and will go through at least next August and maybe beyond. It could be a two- or three-year cycle.
It’s hard to predict, it just depends on the market. If a provider sees this market as an opportunity again, maybe they get back in and others follow suit. It’s not an opportunity right now if everyone has to be re-underwritten, re-surveyed, etc. It’s a great market for the surveyors. They are the one true winner out of this whole thing. I’ve talked to surveyors who are booked out six, eight weeks.