Navigating the Yacht Insurance Market in 2024 and Beyond
Yacht owners have been facing one of the most challenging yacht insurance markets in a generation. Today’s challenges can be traced back to a series of significant weather events, an extended soft market, and significant changes in reinsurance that have shaped the industry since the 2017 hurricane season. The devastation caused by Hurricane Ian in 2022 serves as the latest reminder of the market's vulnerabilities.
The stormy path to 2024
The journey to our current state of the market began even before the pivotal 2017 hurricane season, a season marked by a trio of devastating hurricanes: Harvey, Irma, and Maria. These three storms, among the top five costliest in history, were part of the natural catastrophe-related events in 2017 that inflicted around $330 billion in insured and uninsured economic losses.1 The losses came mostly from hurricanes, severe storms, wildfires, floods, and other weather events in North America, the Caribbean, and Europe.
For years leading up to 2017, yacht insurance rates plummeted as an influx of competition between carriers created a rate environment that was unsustainable for many insurers operating in the sector at the time. This was also aided by much cheaper reinsurance rates for the yacht business. This low-rate environment changed instantly after hurricanes Harvey, Irma and Maria. Hurricane Maria, in particular, wreaked havoc in the Caribbean, devastating numerous charter bases and hundreds of yachts.
The repercussions of these storms extended far beyond immediate damage and losses, significantly impacting the global reinsurance market. A fire at a renowned yacht builder that constructs some of the world's largest yachts further strained the yacht insurance market when a 430’ mega-yacht went up in flames, dealing another blow to an industry already reeling from natural disasters.
After the devastation from the events of 2017/2018, Lloyd's of London, a pivotal player in insurance, addressed profitability concerns in the yacht insurance market. In the subsequent nine months, there was a staggering 70% reduction in market capacity in London alone. This reduction had a cascading effect, prompting U.S. admitted carriers to tighten their underwriting guidelines and appetite to avoid taking on the business that was exiting the London market.
The final blow came in the form of Hurricane Ian in 2022. This catastrophic event prompted almost every admitted carrier in the yacht insurance market to reassess their guidelines and appetite. They also dealt with large increases in the cost for their reinsurance for 2023. Some carriers reported an increase in their reinsurance programs of up to 30%, while others found the cost of reinsurance to be prohibitively expensive, leading them to take underwriting action such as lowering their maximum limits or dropping windstorm coverage.
The impact on yacht owners
The repercussions of this hard market and the coverage challenges are being felt by yacht owners across the board. Florida, due to its vulnerability to hurricanes and the potential impact on reinsurance, has borne the brunt of these changes. The overall market conditions have brought larger windstorm deductibles, difficulty in getting windstorm coverage, new lightning deductibles, as well as significant premium increases at renewal and much higher premiums on new policies.
The most disruption is happening in the following areas:
Owner-operators in Florida with yachts 65’ and above: These individuals face increased scrutiny and higher rates due to the lack of full-time captain or crew. Most carriers now require a captain on this size yacht.
Absentee owners in Florida: Owners who are not present year-round may find it more challenging to secure coverage, even with a comprehensive storm plan.
Large center consoles in Florida with three engines or more: Increased underwriting scrutiny affects this category of vessels due to increased popularity of this segment and continued concern over speed and theft exposure.
Older yachts over 15 years of age: The age of the vessel can influence rates and availability especially when most carriers are replacing “new for old” with regards to parts and systems in a partial loss claim.
Yachts moored in the Bahamas or Caribbean: Geographic location plays a significant role in risk assessment, and these areas are seen as much more vulnerable to hurricanes.
Boats kept on lifts with no comprehensive storm plans: Adequate storm preparedness is paramount, but there have been many losses in past hurricanes where the lift failed, or the boat came off the lift.
Owners with prior losses: Loss history plays a big part in risk assessment especially for an unfavorable loss history. Carriers have declined accounts with only one prior loss.
Even the mega-yacht market, which has remained a little more stable, is not immune to the challenges. Many yacht owners have experienced premium increases of 20% or more in the past year or two, and there is increased scrutiny on captain and crew qualifications, cruising itineraries, and timing of yard periods.
Mitigating the challenges
Given these challenges, it's crucial for yacht owners to take proactive steps to navigate the evolving landscape:
Create comprehensive storm plans. Beyond merely storing your yacht, consider detailed storm plans that include a storm-rated storage location or removing your yacht from the area altogether.
Maintain owner-operator credentials. If you own a yacht longer than 65’, maintain a detailed resume of boats owned, waters navigated, and any relevant training or credentials, such as a USCG license.
Implement security measures for center console yachts. For larger center console vessels with outboards, install an active theft-tracking system and consider mechanisms to disable the outboards.
Obtain updated surveys. If you are considering exploring new carrier options, it will be important for your yacht to have an updated survey conducted by a NAMS/SAMS surveyor in the last 24 months.
Consider relocation. If possible, contemplate moving your yacht out of Florida during hurricane season to reduce exposure.
Plotting a course forward
As we face the challenges of the yacht insurance market in 2024 and beyond, it's essential to recognize the complex web of factors that have brought us here—climate change, natural disasters, capacity fluctuations, and reinsurance dynamics have all contributed to this challenging landscape.
To navigate these turbulent waters, partnering with experienced yacht insurance professionals who understand the intricacies of this evolving market is essential. Trusting in a team that can secure coverage when others cannot is often your best course of action in these uncertain times.
Yacht owners must adapt to this evolving landscape by being proactive, educated, prepared, and well-informed. The journey ahead may be challenging, but with the right strategies and partners, your vessel can continue to cruise smoothly, even in the face of uncertainty.
Contact the Yacht Team at Marsh McLennan Agency Private Client Services for a complimentary risk consultation to help you explore your options.
