Insuring Multihulls

[johnMi 2]

me too

[markm 30]

Think we'll have to agree to disagree AC.

 

Have pretty good knowledge of two general insurers from the 90s and a few life insurers so it's not necessarily representative, but none were using the approach you've outlined.

 

In one case, I confess not the one I'd exactly hold up as a shining example of how it should be done, I'm not sure that they considered local conditions and history at all, New Zealand was very much just one of the more easterly suburbs of Sydney. Definitely an interesting approach to business, particularly when it comes to stuff like tax compliance. They're no longer around which is possibly not a complete surprise.

 

Will also have to disagree on what constitutes risk taking. I think a company thats operating with high levels of confidence of it's incoming and outgoing money and probibility of significant variations isn't taking many risks, smart business practice yes, risky, no. Given that you said yourself that they are very reluctant to operate in business areas where they can't accurately predict their outgoings for the year (multis for example), I pretty much rest my case. They deal in risk yes but they aren't taking risks, there's a difference.

[rigger 47]

The insurance company in now totally ON RISK. He can then decide how susceptible this portfolio is to large scale catasdtrophic losses and elect to transfer a proportion of his risk onto a Reinsurer and in some cases e.g. House, it might be a signifcant % of that risk is passed on. But other classes that are less exposed to Catastrophic evente.g. cars, boats, then little or no Reinsurance is involved. Hence most if not all the risk is retained by the insurer. So insurance companies ARE risk takers despite their conservative suit-wearing appearance to the contrary!!!

 

I had an insurance payout that had to goto the london reinsurer to get paid out, it was way less value than the cost of half an avergae house in Auckland, I was insured locally through an insurance company with offices in NZ yet had to provide info to the reinsurer. Or at least that is what the insurance company told me when I queried the delay

[Tim C 23]

How about instead of just bitching about insurance companies we all do our bit to reduce the risk to them, and make it a more interesting business proposition (to insure multi's).

I have been involved with the multi fleet for a couple of decades. Let me suggest a quick check list to reduce risks to ourselves and insurers.

 

Aluminium beams (which we all know have no place in the marine environment) do need to be replaced before they break. Perhaps every 10 years, not 25.

 

Rigging should be well checked and possibly replaced after 7 years. Not 25.

 

Make sure you can actually reach and release all of your working sheets from the helm. And that none of the winches always gets an overwind if you don't quite do something right...

 

Replace any foil with an alloy sheer web in it. Before it breaks.

 

Check, or have checked, you gas installation.

 

Have a way of reefing and getting home in a gale. Don't say; I deep reefed and the mast fell down (two large multis have in the last two years...)

 

If your sails are old and tired, then buy some new ones yourself.

 

I'm sure you could all add to the list. Both from an insurance, safety and resale value point of view a combined effort to raise the bar would help us all a great deal...

[Guest]

Ah Tim you missed a couple of the obvious.

1: Never make a claim ( they like you better then)

2: Don't buy a trimaran or a Ferro boat especially not a Ferro trimaran ( every other type of craft is ok).

then there is another aspect you will have to look at.

Kill or maim any news person who reports any foreign trimarans getting into trouble , create a total media black out on Trimaran mishaps.

 

The points you raise are very good and should be part of most boat owners maintenace program.

infact forsight and pre checks in our day to day life would probably help with all types of insurance.

but who the hell does that?

[Guest]

There’s been lots of comment here over time about marine insurance, mostly ill informed and usually derogatory about insurers. Time you took the Marine Yacht Insurance 101 course!

 

I’ve been in the marine insurance a long time and I choose not to insure pleasurecraft of any sort simply because there’s no long term prospect of making sustainable profits and hence a reliable return to our shareholders on the risk capital they entrust me with. Here’s why.

 

As background, and so my comments my have some credibility…. First and foremost I’m a racing yachtsman with over 40 years on the water including extensive coastal & bluewater cruising, coastal and ocean racing experience. Professionally I’ve been a marine underwriter in the international insurance industry for over 30 years.

 

For every $100 premium the Insured (you) pay, I pay between 15-20% or more to the broker for presenting me the business. I spend between 15-18% on expenses (rent, salaries etc), I’m charged between 12-15% as a contribution to my companies catastrophe reinsurance programme (that goes to protect me against the impact of tsunamis, cyclones, earthquakes, a 747 landing in a major marina, etc). That leaves me between $47 and $58 from which to pay claims and return an untaxed profit to shareholders. I’m expected to return an underwriting profit of between 10-15% up the chain on my marine portfolio and my salary and bonus is dependent on it. These are generic numbers based on the worldwide industry as a whole and not specific to any particular insurer.

 

I have an excess (known as a retention) on the reinsurance programme of anywhere between $1,000,000 and $5,000,000 depending on the size and philosophy of the Insurer so any one claim arising from one occurrence has to be more than this before I can get any contribution from reinsurers. I can’t avoid paying this as the marine portfolio is just as exposed to catastrophes as any other class of business, just different catastrophes are more likely. On a long term basis I need to fund that $1m-$5m so I can afford to pay it if something bad happens. I’m guided on the period over which I need to fund that retention by actuaries so if it’s once every 50 years I need to fund $20,000 per annum for a $1m retention. On a 500 year cycle and a $5m retention that’s still $10,000 per year.

 

I could, if I want, buy specific reinsurance on any individual risk or group of risks I insure and buy what is known as facultative reinsurance (a helping hand) whereby the reinsurer shares either on a “quota share” basis where they proportionately share the loss from the first $ of any claim or an “excess of loss” basis where the reinsurer pays 100% after any claim exceeds an agreed amount. If I buy quota share reinsurance, the reinsurer takes the same proportion of my original premium as he takes of the risk. If I buy on an excess of loss basis the reinsurer charges me a fixed premium based on his assessment of the likelihood of him paying any claim which exceeds my “retention”. Either way it’s an additional cost to me and reduces the $1 premium further. Most sizeable insurers will not buy facultative reinsurance on small risks (for that read pleasurecraft) - it’s not cost efficient and internationally there are less and less reinsurers prepared to offer facultative reinsurance on pleasurecraft.

 

An insurer has to have significant capital to operate. You wouldn’t want it otherwise..... (see what happened to AMI in NZ) We get that from our shareholders and regulators now dictate how much we must have based on our risk profile. As with capital in any business it chases the best return so I have to compete for a share of my company’s capital with our other underwriters who may write potentially more profitable property or liability business. To justify the allocation of capital I get I’d better have as good if not better likelihood of making a better profit than them since the potential NZ market place in marine is so small relative to their business – they have a better spread of risk.

 

Returning to the $100 premium paid. Let’s assume I write a fleet of 100 multihulls with an average value of $100,000 each. If I charge a rate of 1% that would generate $100,000 premium per year for the $10,000,000 of risk I’m exposed to. If one multihull is a total loss every 2 years from that fleet it means I need to fund $50,000 per annum each year to pay for it. Based on my 47-58c pool of premium left to pay claims I’m already down the tubes by $3,000 or at best I have only $8,000 left to pay all the incidental claims from the other 99 clients for things like groundings, collisions, thefts, broken masts, capsizes etc that didn’t result in a total loss l and I’ve still not funded my catastrophe retention. The likelihood of me now showing an untaxed return of between 10-15% is getting remote. Accepted there are a lot more variables in the equation but you should get the general picture.

 

Another way of looking at it, and without any inside knowledge of the actual costs involved, my guess is that it will take the full net premium collected from 300 similar yachts at current market rates to pay for the recent collision and sinking i read about here in the Auckland harbour of Gypsy.

 

The answer is to charge more premium, pay less commission to the broker, reduce expenses, buy less catastrophe reinsurance (the AMI way) or become a lot more selective in the risks I write and reduce the likelihood of the total loss from one every 2 years to something more manageable. Another answer is to just to deny or avoid paying claims. Problem with all this is my competition is still trying to grow their portfolio and is still prepared to pay big commissions to brokers who generate new business (all else being equal brokers will chase the highest commissions), expenses are already cut to the bone (I’m not about to cut my own salary), international reinsurers have their own problems and won’t shift their pricing. To top it all off my competitors won’t let me charge more premium (I won’t keep or get any new business). Finally most marine underwriters are generally pig ignorant about pleasurecraft and don’t know how to selectively sort the wheat from the chaff and even if they could, the pool of available risks is small enough already. Also actuarial advice is usually proved to be rubbish because the risk profile is so broad (think of the differences between a GRP club racer cruiser production boat and a high mod carbon race yacht) so that doesn't help either. Finally, avoiding claims has a history of coming back and biting you in the a**e..... doesn’t do much for your reputation in the long term and the regulators and the law don’t like it.

 

Despite what some might think insurers are not gamblers and shouldn’t be expected to be. We assess risk factors and allocate risk capital where it’s most likely to give a decent return on equity. Unfortunately pleasurecraft insurance worldwide has over the longer term failed to provide consistent profits to warrant the capital employed and while some Insurers leap into the market every now and again it’s usually because the insurer is in the learning phase of the business. They move out just as quickly when they learn or shareholders tire of the losses generated. Some keep their marine portfolio deliberately samll and only use if to support their other buiness when they have to. Incidentally I know of only one active marine underwriter (not broker) in your NZ market who regularly goes sailing and he doesn’t write pleasurecraft either. Most wouldn’t know the difference between the sharp end and the blunt end and the only difference between a TP52 and an J24 is the length.

 

For those of who think that I really make my profits from investment returns on your premium and delay paying claims for as long as possible to maximise profits I’m not denying that has in the past happened (called cash flow underwriting or paying yesterdays claims out of tomorrows premiums) but we’re now very much constrained by regulators as to where we can invest your premium and if we can only get a 5% return on cash/secure investments as currently you’ll see it doesn’t have much impact on the underlying underwriting result.

 

In light of all this can I please have all your discretionary $ as risk capital (oh go on... this is such a good deal you should mortgage the house as well) and I’ll form a dedicated pleasurecraft insurer in NZ. Along with all your fine yachts I’ll insure all the canting keel carbon racers, blue water cruisers and racers, shorthanded or otherwise, Rivera’s driven by property developers and finance company directors. In addition I’ll write every Farr 40 on the start line or coming into the top mark on port hoping a gap will open and every owner who thinks they should at least make one claim very couple of years to recover his premium or inflates his real claim by his excess so that he comes out all square. etc. Of course I’ll pay myself a mega fat salary with a fat annual bonus based on the total volume of new business I get but I promise I’ll do my very, very, very best to give you a return better that what you could get risk free (sort of) from the bank?

 

Be grateful for the insurance you have and hope that not too many other underwriters read this. You need to keep them as ignorant of the realities of yacht insurance for as long as possible before they work it out for themselves.

[Atom Ant 0]

Thank you for that - clear, concise, and understandable. No doubt someone here with none of your experience will disagree!

[Fogg 427]

Well said, Insurer. But as AA says I'm sure you'll still meet with challenges to your statements from people who think they understand GI in NZ but don't!

[Guest]

How about instead of just bitching about insurance companies we all do our bit to reduce the risk to them, and make it a more interesting business proposition (to insure multi's).

I have been involved with the multi fleet for a couple of decades. Let me suggest a quick check list to reduce risks to ourselves and insurers.

 

Aluminium beams (which we all know have no place in the marine environment) do need to be replaced before they break. Perhaps every 10 years, not 25.

 

Rigging should be well checked and possibly replaced after 7 years. Not 25.

 

Make sure you can actually reach and release all of your working sheets from the helm. And that none of the winches always gets an overwind if you don't quite do something right...

 

Replace any foil with an alloy sheer web in it. Before it breaks.

 

Check, or have checked, you gas installation.

 

Have a way of reefing and getting home in a gale. Don't say; I deep reefed and the mast fell down (two large multis have in the last two years...)

 

If your sails are old and tired, then buy some new ones yourself.

 

I'm sure you could all add to the list. Both from an insurance, safety and resale value point of view a combined effort to raise the bar would help us all a great deal...

 

Agree totally Tim, the reality is that the Multi fleet has displayed a lazie faire attitude to damage and capsize (8 or 9?) in the last few years, hence quite understandably insurers have walked away saying, too risky. Just the same as trying to insure a car on the track, too risky no insurance.

 

If the fleet took a voluntary, no capsize, no rerighting damage exclusion there could be a case made for a comprehensive group cover, maybe including racing.

 

But if you exclude those you just need THird party and fire i guess.

[Tim C 23]

So who has got some current recommendations or referrals to talk to regarding multi insurance??

[TimW 1]

NEIL BAILEY

look left

[Tim C 23]

NEIL BAILEY

look left

Tried that, and many others. All trying to be helpful, but no progress. Almost seems as if no one will cover a boat on a swing mooring let alone a multihull.

Still a few irons in the fire, but it isn't looking positive.

Having no claims in ten years seems meaningless.

Very frustrating...

Any further suggestions?

[Guest]

Maybe it’s time to get organised,,, I think it would be a good idea to do a survey through the NZMYC (via private emails, not on public forum) on things like

1) what claims have been made by members in the last 10 years

2) the rough cost of each claim

3) the value to be insured

4) current premiums

5) location of boat

6) what security in place to avoid thefts

 

Then use that info as a starting point to see if it is viable to form a group insurance scheme with some negotiating power and a large enough chunk of business for a number of insurance companies to take interest.

- The data could be shared within the club, and names kept confidential if preferred.

 

Conditions to minimise risks could then also be discussed as a group, like

(just ideas/examples)

- What extras in what wind conditions

- Ways to avoid congested start lines

- What items covered if left on board with a swing mooring/or unsecured storage area.

- What conditions to be met for condition of boats/moorings etc

- What excesses, and if/how they are affected by the above conditions

 

It could also go as far as having agreed repairers - who keep costs down in exchange for business from group scheme repairs. And using agreed skilled/qualified assessors who can tell if a claim is going beyond what it should, and maybe even assessing boats going into the scheme etc.

 

Other clubs could be approached as well, every club has an email list of members, and a survey could be done by members interested in cheaper insurance. Multis/Monos etc and those that find insurance easier could still benefit from a cheaper premium.

 

It seems that too many people have issues when it comes to insurance, and there has to be a better way!!

 

The insurance I have for my campervan is via a group scheme in the motor caravan association and that is a well organised/cheap group scheme . i.e members only can use it, they are signed up by two other members, and everybody knows that too many claims increase the premiums for everybody. I had the same campervan in Spain and insurance there (3rd party compulsory) was so ridiculous that one company even refused to give me 3rd party because it has a sink and fridge, that was the reason in black and white, what the????. And it is becoming as ridiculous here.

 

I have a vision of a list of 100's of boats, of owners prepared to join a group scheme if a better price can be given. Unrealistic? can it be done? worth a try??

[Hurts 6]

It's definitely worth a discussion and I'd be keen. I've made a few inquiries in the last few weeks and basically the answer is "No" Trimarans are out, I still have a few organisations/brokers to check out but it's looking a little grim.

[Marshy 30]

Anyone tried Dan at PIC Insurance? Last time i spoke he seemed fairly happy to be involved in insuring multi's? They are only brokers so deal with a few big under writers and have good contacts so might be worth trying?

 

Dan Garner

Daniel@pic.co.nz

(09) 274 5751

 

http://www.pic.co.nz/marine.html

[ab1974 1]

I got quote a yesterday from Club Marine. They seem to generally cover bridgedeck and will cover for capsize and racing.

[TimW 1]

Great Post Eamon. I really think a collective group Insurance scheme is the only possibility of us moving forward.

 

We did have Dan come to the club not so long ago but even IF everyone was involved the numbers just don't stack up with Multihulls alone.

 

If it could be Club Marine that would be fantastic. It must be VERY embarrassing for Club Marine to be Major Sponsors of the RNZYS summer and Winter series and for them to refuse to Insure Trimarans ???

[Guest]

If it could be Club Marine that would be fantastic. It must be VERY embarrassing for Club Marine to be Major Sponsors of the RNZYS summer and Winter series and for them to refuse to Insure Trimarans ???

 

Huh?

That is like saying Hallspars shouldn't sponsor a sailing event because they don't/can't make all the spars.

[Guest]

Racing cats and tris are going to struggle to get cover in a small market like NZ.

Especially when every regatta you go to there is a mast down, a prang or a capsize

 

Maybe the NZMHYC could promote a more realistic insurance scheme...

 

In my humble opinion the multihull racing fraternity is pretty much stuffed when it comes to racing cover and capsize cover. If you want to go racing a multihull you pretty much have to man up and cover rigs, sails and capsize yourselves until you can fix your reputation.

 

Try and promote a schemme with basic cover?

 

1/Third party and salvage

>i.e gives you the cover needed to club race and use marinas

 

2/Comprehensive cover while moored

>Marina berthed - easy

>Moored on a mooring sheltered water- harder

>Moored on a harbour mooring - harder again

 

3/Comprehensive cover while cruising

 

4/Total loss cover while racing

>No rig or sails cover

>No capsize cover.

 

5/Take a decent excess so that muppets aren't claiming each time they drown their outboard etc.

[Megwyn 2]

All well and good Paddy O - but ours is not a racing tri - shes quick but we do not race, yet we could not get full insurance. The only reason we managed to get 3rd party was because Offender already had her insured and they let us roll it over. I queried getting full cover for her in the future and was given a very shady answer - they are not keen.

 

So how to we protect our liabilities?

M