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Insurance woes - Coverage remains costly in storm areas

Though rates aren’t coming down yet, some say they foresee no major increases on the horizon

Though rates aren’t coming down yet, some say they foresee no major increases on the horizon

Talk to a Florida boater, and sooner or later the jawing turns to insurance and how hurricane losses have driven rates sky-high. Richard Hudson’s insurer raised the premium on his 29-foot twin-engine SeaVee 45 percent last year, and he had never filed a claim. He eventually lowered his premium by half, to $2,200, by changing insurers and taking a $25,000 special theft deductible — no small concession in Miami, where boat theft is big business.

“I’ll take a $25,000 hit if I lose one or both of my engines,” says Hudson.

Charles Stephens’ 2006 premium nearly tripled to $1,600 last year on his outboard-powered 22-foot Scorpion, which is valued at only $12,000. He dropped his windstorm coverage, cut his liability insurance by a third, and increased the deductible to bring the rate down. “I reduced my coverage to keep the boat insured,” he says.

Insurers gave a collective sigh of relief when the 2006 hurricane season ended Nov. 30 with no U.S. landfalls, but they are far from saying the hurricane scare is over. That means boat insurance still is expensive and hard to find in Florida, the Gulf states and along the southeast U.S. coast, where the threat of catastrophic hurricane damage remains very real.

“Even though we got through a year where we didn’t have any hurricanes make landfall here in the U.S., [forecasters] say the overall period of increased hurricane activity is still with us,” says Jim Holler, senior vice president for BoatU.S.’s marine insurance division. “It’s still a tight insurance market in catastrophe-prone areas.”

Mike Smith, president of Global Marine Insurance based in Traverse City, Mich., agrees. Smith, an insurance agent, has two offices in Florida. “We get hundreds of calls a week that we have to turn away,” he says. “Florida is just a disaster area in that regard.”

Yet all is not gloom and doom. Lower rates are probably a pipe dream for this year, but Al Golden, president of International Marine Insurance of Grasonville, Md., doesn’t foresee any big increases, either. Smith also sees a glimmer of hope.

“Big picturewise, the door is ajar for [increasing] capacity, but ever so slightly,” he says.

Insurers took in a lot more than they paid out last year, as did the reinsurance companies, so they are under pressure to offer more boat policies in hurricane-prone areas. That’s good news, Smith says, but probably not for 2007. One consistent message that insurance panelists left at a November meeting of the National Marine Banking Association in Key Largo was, “Things are not loosening up,” he says.

So boaters are biting the bullet. They still face steep rates, high deductibles and reduced coverage. Some will have to forego windstorm coverage to get affordable insurance, Smith says. Others may have to go to a 10-percent deductible. Still others may have to opt for insurance from Lloyds of London, which is very expensive.

One upside is that rates in non-hurricane areas are down, as insurers vie for business to make up for smaller portfolios in the Southeast and Gulf areas. Also, some new players in the insurance market are letting Smith sell two policies in Florida if he can deliver eight from other regions. “That bodes well for the marketplace,” he says.

Another light hurricane season in 2007 could moderate rates a little and improve availability for 2008, but if the year sees a couple of hurricane landfalls and a lot more boat damage, all bets are off. “We’re back where we were — or a couple steps behind,” Smith says.