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Yacht insurance costs on the rise

Premiums and deductibles are up in the wake of last year’s string of hurricanes

Premiums and deductibles are up in the wake of last year’s string of hurricanes

After last summer’s unprecedented blitz of hurricanes, yacht insurance remains available in Florida and the hurricane-prone Southeast, but storm deductibles and premiums are on the rise.

“All the insurance companies that I am aware of have increased their named-storm deductibles,” says Mike Smith, president of Global Marine Insurance and a director of the National Marine Bankers Association.

Deductibles for named storms — hurricanes and tropical storms — have risen from pre-summer 2004 levels of 2 to 4 percent to upward of 5 percent, says Smith, who sells policies for anything from PWC to megayachts.

Insurance premiums are up 5 to 20 percent for all sizes of boat, he says. Small to mid-size boats suffered the steepest increases, while megayachts took a smaller hit because they have professional captains who get paid to keep the boat out of harm’s way, Smith says.

Rate and deductible increases are most noticeable in Florida, but coastal areas from Chesapeake Bay to Brownsville, Texas — the Southern hurricane belt — have been affected, he says.

“By all accounts, [last summer’s hurricane season] was the worst boat insurance disaster in boat insurance history,” says Smith. The toll from Ivan, Jean, Charley and Frances — all of which roared through Florida last summer one after the other — was $680 million, about $180 million more than Hurricane Andrew in 1992.

Smith says the good news is that after Andrew, marine insurance companies diversified their holdings from Florida to other regions so they wouldn’t be overexposed to hurricane losses. As a result, he says, only two insurers that he knows of, Allstate and American Modern, have stopped writing boat policies in Florida due to hurricane risks.

Insurance is available, but one class of Florida boaters — absentee owners — apparently is getting the cold shoulder from insurers. Smith says insurers don’t want to insure a boat whose owner keeps it in Florida but lives elsewhere during the June-to-November hurricane season unless the owner has a written hurricane plan that identifies a person other than the marina operator who is responsible for moving, hauling or securing the boat before a storm hits.

“This is a big problem,” Smith says. “Our [insurance] companies don’t want to insure absentee owners anymore.” Some boaters try to get around this by claiming they live in Florida during hurricane season when in fact they live in Minnesota. Smith says if the insurer learns of this deception, it can be grounds for withholding payment on a claim.

He says one option an absentee owner has is to pay a management company or delivery captain to look after the boat during hurricane season and be on standby to implement a plan for securing it if a hurricane comes. Smith says most insurers today offer a yacht policy endorsement that pays up to $1,000 to hire a captain to move a boat out of a hurricane’s way or haul it at a marina deemed a safe harbor.

“The insurers are offering to help risk-manage the boat,” he says.

Responding to the absentee owner’s dilemma, Joseph Charles, CEO of Charles Industries of Rolling Meadows, Ill., a manufacturer of marine electrical and phone systems, is building a marina near Stuart that specializes in storing boats for snowbirds and in providing safe harbor during hurricanes. River Forest Yachting Center, on a lagoon between two locks on the St. Lucie River, will have a 45,000-square-foot indoor facility that is climate-controlled and rated for winds up to 145 mph for storing boats up to 65 feet. The marina also will have a 6,000-square-foot building without climate control for smaller boats; outdoor storage on jackstands secured with tie-downs to cement pads; and 1,400 feet of sea-wall dockage. The marina will accommodate 350 boats, including 21 100-footers along the sea wall.

Charles says membership in River Forest’s “Hurricane Club” can earn a boat owner a discount of up to 20 percent on insurance premiums. Smith warns that yacht insurance will become more scarce in Florida for absentee owners who don’t have a workable hurricane plan.

“It’s going to be a bigger and bigger issue, unfortunately,” he says.