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Seven hurricanes, costlier insurance

Insurers are bumping up rates and deductibles for boats in Florida and along the GulfCoast

Insurers are bumping up rates and deductibles for boats in Florida and along the GulfCoast

The insurance premiums on Charles Stephens’ 1984 Chris-Craft Scorpion have quadrupled over the past five years, and he expects his insurance to go up another 50 to 60 percent this year. That will raise his premium to between $1,400 and $1,700 annually for a $12,000 boat — smaller than 25 feet — powered by a new 225-hp outboard.

“You tell me that isn’t something that’s going to change the market,” says Stephens, a longtime boater and operations manager for a Florida-based marine business-to-business Web site. “We’re seeing people walking around with $10,000 to $20,000 storm deductibles.”

Welcome to the brave new world of yacht insurance in Florida, the Gulf states and the Southeast in general, where insurers are reeling from more than $1.5 billion in boat damage caused by seven hurricanes in two years.

“I think we’re entering a new era of recreational marine underwriting,” says Jim Holler, senior vice president of marine insurance for BoatU.S., one of the nation’s largest boat insurers.

Holler says insurers are bumping rates way up for boats in hurricane-prone areas or deciding not to insure them at all. He predicts it will become increasingly difficult to find insurance “at whatever price” for boats in marinas exposed to hurricane winds and surge. And Holler isn’t the only one singing the blues.

Mike Smith, president of Global Marine Insurance, a Traverse City, Mich., agency with three offices in Florida, says the news isn’t good for boaters: 50-percent higher rates on the GulfCoast from the Florida Panhandle to Texas, and 20- to 50-percent increases in the SunshineState. He says named-storm deductibles have risen to 10 percent or more, which means that damage from a tropical storm or hurricane is subject to a deductible equal to 10 percent of a boat’s value.

Many insurers simply won’t write any new business in Florida or along the GulfCoast. They have capped the number of boats they are willing to insure in these areas. “Our companies continue to cut back and restrict our ability to write business there,” Smith says. He says the pool of companies that are writing Florida/Gulf Coast business is down from 20 to maybe five or six now.

The news, however, isn’t all bad. Al Golden, president of International Marine Insurance Services of Grasonville, Md., says some rate hikes have been “Draconian,” others “not too bad.” Golden says he hasn’t seen any rate increases much higher than 30 percent for 2006, and a few insurers still offer 3-, 4- and 5-percent named-storm deductibles.

However, the volume of insurance available to the boater and the number of companies writing new business in hurricane zones are much reduced. Insurers are monitoring their business in these zones daily, entering the market when they drop below their cap, withdrawing when they exceed it. They also are trying to find ways to stay in the market while limiting their exposure to hurricane losses. That means sharing more of the risk with the boater; increasing the deductible; excluding damage to mainsails, Bimini tops, furling sails and sail covers so owners will do their part before a storm; or excluding altogether damage from a hurricane or tropical storm.

“They are trying to find some way to shift more of the burden to boat owners so they’ll do the basics [to secure their boats],” Golden says.

Insurers also are extending the boundaries where they won’t cover hurricane or tropical storm damage. Some restrict storm coverage in the Caribbean only, but most are including the GulfCoast and Florida, as well. Some are expanding the zone into Georgia to CumberlandIsland or Savannah, and others to Cape Hatteras, N.C.

Companies also are putting the squeeze on the absentee owners who make up such a large share of Florida boaters, especially. “Many companies don’t want them, period,” Smith says. The few that are willing to cover absentee owners want them to have written contracts with a captain or management company to secure their boats in the event of a storm if the owner is back home in Ohio or New York. Absentee owners who don’t declare their real residences could lose their coverage, not receive any payout for damages, and face insurance fraud charges, if the company found out they were lying, Smith says.

Smith says, too, that many companies are requiring owners to submit a written hurricane plan with their insurance application. Golden thinks this is foolishness because the best-laid plans often don’t work out, and if an insured can’t follow the plan as written before a hurricane and the boat sustains damage, will this failure to execute the plan invalidate the coverage? An owner needs to ask his or her carrier this.

Some companies will pay owners to haul their boats before a storm, but Golden says the feature isn’t that useful because the insurer usually won’t reimburse an owner for a haulout until a hurricane warning has been issued, and that typically is 24 hours before a storm hits. By then, it may be too late to get hauled or to safely move the boat.

With scientists forecasting 10 more years of hyperactive hurricane seasons, Smith isn’t optimistic that yacht insurance will become any cheaper or more available in the foreseeable future in Florida or along the GulfCoast. He is concerned that the insurance crunch soon could affect boat sales. In fact, he knows of one dealer who almost lost a sale because of the high price of insurance until Smith found a policy in his price range.

If there is a silver lining to this cloud, it is that insurance rates in other parts of the country should begin to edge down as companies rush to sell more insurance outside the Southeast. Smith says he is “aggressively marketing” to the Great Lakes, and that companies “are looking to write business anyplace where there aren’t any storms. We’re going to see a lot more competition in those areas,” he says. His advice to boaters in areas where insurance is hard to find: “Shop around, though there’s not much shopping to be done.”

And take the time to secure the boat before named storms make landfall. Smith says a BoatU.S. study shows the best way to secure a boat is to haul it; set it on firm ground on jackstands chained together; tie it down with nylon webbing straps secured to the ground with augers; strip all canvas and sails; and seal ports, companionways and hatches with tape. And do that every time a storm threatens.

“It’s a heck of a lot of work,” Smith says. Unfortunately, you don’t see a lot of people doing that, he says.