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Insuring Multihulls


Megwyn

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Bitching about it does nothing but make us look pathetic and whiney

 

Quite right, and if nobody bitched or moaned about things that are not quite right in the world there would be no forty hour working week, no ban on child labour and Hitler would have done whatever the heck he wanted without opposition.

What you are saying is that it is okay for a business to do what ever the heck it wants and we should not have an opinion. Well I am pathetic and whiney and it has served me well all these years i would rather be this way than exist as a god dam sheep. :shock:

 

Insurance is voluntary.

they are compaines driven by profits.

If there was profit in insuring mulitis, all would do it.

 

Private companie offering a service (or not) is vastly different from child labour or 40 hour weeks.

Are you proposing the govt should legislate to make these companies insure us?

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Well Offender, not that I want to be a litterary and historical critic or anything but you do realise the foolishness of your argument.

 

I think you may find that Chamberlain et al was like you seem to be happy being, a bitcher and a winer. Hitler figured out that bitchers and winers, even whole flocks of them, achieve piss all and could be safely ignored. It was the people that stopped bitching and got off their collective butts and did something that caused him grief.

 

So, companies whether deluded or not, don't want to insure multihulls, that's their right, suck it up.

 

Could I suggest however a simple solution which you may find more effective than wining. Many insurance companies started off as mutual societies, in effect cooperatives, likewise quite a few companies now self insure. If multihull types are so hard done by as you imply, take it on yourselves, run your own insurance scheme, in effect self insure.

 

Of course if you find that idea too risky, perhaps not profitable or something, well you can hardly blame other people for something your not prepared to take on yourself.

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Try visiting a marina, or Italy, or Mexico, it is spreading.

 

To be 'parked' on a trailer - if it gets 'wheels' to work - eh??? ciao, mate hope you get there - before all the Mt. Gay gets drunk. Yes, jj

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All marinas and boat haulouts require your boat to be insured now this would seem to be driven by OSh requirements. To me makes insurance compulsory.

 

Markim: you are right I confess I do not know much about Mr Hitler nor Mr Chaimberlan i used it as an analogy, (so not my best work) To some it is bitching and whining to others it is a stand against something they are not happy with, I guess it depends where your are standing as to which view you percieve.

Insurance is a business and profit driven, with that I have no problem. They are business that have been well supported over the years and they have reaped the rewards. There are still profits to be made i have never complained about the cost of insuring my boat and I would be happy to have the choice but the companies are flatly refusing to even offer a proposal and that irks.

 

I am more than happy to put my money where my mouth is and start a collective. AS far as I am aware the Collective scocieties are underwritten by larger companies which makes me wonder if we could still have a problem.

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Insurers attempt to assess risk, price it accordingly and offer a product for sale. Sometimes they get it right, sometimes they get it wrong. Usually the worst thing that happens when they get it wrong is they lose a few $$$s and review whether they are charging the right price for the risk. But as recent events show, sometimes they get it spectacularly wrong viz. AMI.

 

In order to reach a price that fairly reflects the risk they employ guys with pointy heads who enjoy crunching frighteningly complex numbers and algorithyms based on historic claims data..... they assess trends, isolate 'one off' events, and end up with a recommended price.

 

In NZ there are enough cars and houses and business to achieve this. And normal market competition ensures prices remain fair and competitive.

 

But in NZ the fleet of boats is uncomfortably small which means only a subset of insurers are willing to offer marine insurance at all. And the number who are willing to offer specialist marine insurance (such as multis) is even smaller simply because the fleet size is so small the actuaries don't have a big enough sample size to confidently put a reasonable price on the risk. So most avoid it.

 

It is not a case of insurers don't like or take risks, of course they do. Just ask any insurer who has exposure to Canterbury right now. But what they don't like doing is taking unreasonable risks or risks that they can't even judge well enough to put a price on.

 

So I'm afraid the root cause of this problem (difficulty with insuring multihulls) is once again a result of living in a small country where the market is too small to make certain things viable. Insurance isn't the only product/service that is hard to get (or is more expensive) because of where we live.

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I am more than happy to put my money where my mouth is and start a collective. AS far as I am aware the Collective scocieties are underwritten by larger companies which makes me wonder if we could still have a problem.

 

Just to correct a few misunderstandings. Collectives (or mutuals) are not underwritten by larger companies. Which is why when the mutual company AMI got into trouble they had to bailed out by the government.

 

But by all means go ahead and set up a mutual. In order to do so you will need to get authorisation from the Reseve Bank of NZ and they will send you a raft of documents with legislation that you have to comply with including a minimum solvency standard. Even just to get up and running with a handful of customers it will require you to have an opening balance of several million $$$s in your account to ensure that if you were unlucky enough to get a liability claim from one of your customers on your 2nd day of trading, you were able to meet your obligations. You would also need to appoint some independent auditors to verify that you had done your risk assessment calculations correctly and that you were charging a 'proper' price to your customers i.e. not under-charging for the risk. You would have to prove how you had assessed that risk. Good luck with those sums.

 

Earlier, you said something along the lines of most insurers are charlatans who are running for the hills instead of facing up to their responsibilities but you applauded Bailey's for standing up to their duty.

 

Baileys is indeed a great organisation (I use them myself in fact) but they are NOT an insurer. They are an insurance BROKER. Which means like all brokers they find an insurance company that is willing to underwrite your risk and they take a cut of the premium (commission) for this service. So Bailey's (like all brokers) do not carry any of the material risk on the insurance policy, that is carried 100% by the insurer behind it. The challenge for the broker is to persist in finding an insurer who is preparaed to accept a non-standard risk when most of the usual 'big names' have said "no thanks".

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Try visiting a marina, or Italy, or Mexico, it is spreading.

 

To be 'parked' on a trailer - if it gets 'wheels' to work - eh??? ciao, mate hope you get there - before all the Mt. Gay gets drunk. Yes, jj

:wtf: :crazy:

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Bollocks Ac, insurers offset their risk with reinsurance.

 

You can say that the multi market is so small it's not worth the effort of sorting out reinsurance but to say there's not enough boats to get good data is rubbish, that data comes from offshore and they can do it if they have a will to do it. I don't blame them for avoiding it, but claiming too small a market is dribble from people without the guts to tell the truth.

 

 

As for AMI, as I understand it, they push their luck with reinsurance and particuarly with respect to not understanding or ignoring that they had a serious regional bias in their protfolio, flat out poor management.

 

And for goodness sake get over New Zealand being smaller than pomgolia, surely you knew that before you moved here.

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Holy crap, A showdown at the Crew.Org Corral between 2 of the forums heavyweight thinkers and occasional feisty characters could be on the cards. This could be damn good :lol:

 

:? I wonder if I'll be able to understand what they are saying?

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Markm, your knowledge of how General Insurance works is clearly lacking somewhat. It is doubly bad because many people here respect your intellect and often listen to you and trust what you say (myself included). Hence the utter conviction with which you make incorrect statements is misleading - to put it politely.

 

For anyone else still listening.....

 

Reinsurance is used to offset risk in 2 ways:

 

1. Either to support single BIG risks e.g. whole tower blocks or factories or ships or aricraft. It is not used for underwriting individual SMALL risks like boats, cars or houses.

 

Or

 

2. To support whole portfolios e.g. the whole portfolio of houses in the South Island in case there was a catastrophe that affected many of them e.g. C'church EQ.

 

Neither of these scenarios affects what we are talking about here, a small fleet of pleasure boats. So reinsurance is irrelevant in the decision whether to underwrite these multihull risks or not => the whole marine risk would be held locally for these types of cases. The only exception might be for a whole of Auckland reinsurance clause that covered the event of Rangitoto going up.... in which case we would all have bigger problems than worrying about where our floaty toys were....

 

The final word on reinsurance, you can't 'just' buy it to offset risk. As an insurer, you have to demonstrate a fundamental understanding of the primary risk that you are insuring in the first place before any reinsurer will even open discussions with you about supporting the risk. So even if resinsurance was in the picture for multihulls, it wouldn't be obtainable by any NZ insurer unless they demonstrated credible risk pricing data - which many of them don't have (see below).

 

As for pool size, the data from offshore is absolutely IRRELEVANT. Prices are different, the weather is different, behaviours are different etc etc. Otherwise, here in NZ, we wouldn't need to do any risk pricing at all, we could just cut and paste the UK/US/European/Asian claims experience and BINGO! we've got a price for NZ! Yeah right. :roll: Copying offshore experience isn't done for cars and houses and it can't be done for boats either.

 

I believe you used to work in banking (maybe you still do) - so to draw a parallel, it's a bit like me saying that your bank should close it's local NZ credit risk division and just copy and paste the UK banking lending criteria..... you reckon?! :lol:

 

Oh and just to be clear, I'm not inventing this stuff. I used to be CFO of a large insurer and as a devoted boatie I was disappointed that my own company could not itself offer multihull insurance - it would have given me great pleasure to announce here that the company who I then worked for was able to support all the sailors here. I had detailed, technical discussions with my Underwriters and Actuaries about why we couldn't realistically do it (including trying to get insurance for TeamVodafoneSailing, by the way) but instead we felt we had to leave the small pool of multi risks to the other local insurers who felt they had enough specialist marine experience to run a portfolio - good on them. The NZ multihull pool is too small for all NZ insurers to meaningfully operate (each insurer would only get a handful each for goodness sake) but with a reduced number of NZ insurers chosing to participate, they just about reach crtitical mass to make underwriting decisions. Just.

 

Does that help or do you still think that (in your words) I'm talking "dribble from people without the guts to tell the truth?"

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I'm with you KM, bit past me too.

 

but it is a problem, and I certainly haven't helped.

Three months before I lost my mast my motor was stolen off the boat. That were 2 claims totalling over $12,000. (Once again, Neil Bailey has sorted both claims, no problem).

Now add timberwolf into the equation...

How many tris insured in NZ? 50 maybe?

 

AC, not to criticize your argument, surely it is influenced by all events, we've been countlessly told that insurances will rise by the influence not only of Christchurch, but the Australian floods and also the Cuba earthquake.

 

I was also told that the reason tri's (should there be a ' there?) and not cats are targeted is because of the big tri some years back that crashed on our shores up north during a circumnavigation. Surely that was insured elsewhere.

 

Many years back Tris were also targeted (in the States I think) and Ian Farrier lobbied the insurance companies pointing out the benefits to safety of a (Farrier) Trimaran, and had good success. (Apparently, a Multi is far safer than a mono as far as life is concerned, but is far more expensive to repair, and guess what insurers look at) There has been concern expressed just recently with an F31, and he is again going into bat with his designs. He is to launch the new F22 design soon. Hopefully some of that will rub off onto the General Tri market.

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Accepted my post was harsh for which i apologise AC, however, and accepting the below is opinion.

 

yes, did work in banking and currently and previously in insurance and that does include directly with actuaries, even a bit on systems development for reporting on which reinsurance was based, nothing directly on pleasurecraft alas, mostly life but some f&g in the depths of history.

 

Re offshore data, I agree that it can not be taken in isolation but my experience has been that it does form a very significant base from which risk is assessed. Local conditions and experience is applied to the base of experience that the offshore data represents.

 

Well aware the reinsurance is not handled at a retail level accept as you said where the risk of catostrophic loss on a single policy is to large for a company to accept, didn't intend to imply otherwise. As you've noted though, and as my post intended, entire portfolios (eg, pleasurecraft) or segments of portfolios can form the basis of what is covered in a reinsurance treaty as well.

 

Again as you've noted though, if a portfolio is small it can sometimes simply not be worth the exercise of covering it. In these cases, again as you've noted, sometimes an insurer elects to handle it themselves and sometimes they elect not to cover.

 

Don't intend to imply here either that reinsurance fully covers the insurance risks held, only correcting any perception that insurance companies are carrying the full risk themselves.

 

Insurance companies though are not risk takers, they in effect sell the removal of risk of certain events happening to individuals. Likewise, when well managed they do not take risk themselves (rightly, ask AMI) they consolidate individual unpredictable risk into a block which is predictable, eg, whilst you can't predict whether one car will crash (well sometimes you can but ...) you can predict how many crashes there will be per thousand cars, the average cost per claim and so forth. In effect, they create order (predictability) out of the chaos of what can happen to an individual. All good.

 

As you've said, the problem with multis specifically is they don't represent a whole lot of the pleasurecraft market (think less than 5%) and the pleasurecraft market itself isn't a whole lot. What it turn that means is the predictability goes out the window, possibly you could still be confident of making money over say a hundred year period but not so over one or two years where an extremely few extra or larger claims can wipe out any profitability. In effect, no order out of chaos, no reduction of risk just the moving of it from an individual to a company.

 

Of course you wouldn't model your profitability over 100 years, way to much changes so that's not really an option.

 

You could just consider that multi risk to be part of all your pleasurecraft, problem with this is it doesn't change your risk exposure, it only moves it and that can have other implications in the 'not good' category.

 

You can just charge bucket loads as suggested earlier. Problem here is that while you reduce your risk vs. reward exposure, you damage your reputation and the perception of whether your an expensive company is company wide not product specific. Very easy to lose more than you gain by doing this.

 

Or you can just not cover multis, a nice safe risk free option, particularly when you're not the only one doing it.

 

Point here is that it isn't the lack of statistical data that causes companies to avoid covering multis accept very indirectly, it's that they can't make the risk vs. reward equations come out with a high probability of profit. No criticism of companies intended, as commented it's their objective to be profitable and to minimise risk to that profit. To say there's not enough local statistical data is at best being a little deceptive in my view.

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AC, not to criticize your argument, surely it is influenced by all events, we've been countlessly told that insurances will rise by the influence not only of Christchurch, but the Australian floods and also the Cuba earthquake.

 

I was also told that the reason tri's (should there be a ' there?) and not cats are targeted is because of the big tri some years back that crashed on our shores up north during a circumnavigation. Surely that was insured elsewhere.

 

Apparently, a Multi is far safer than a mono as far as life is concerned, but is far more expensive to repair, and guess what insurers look at.

 

johnMi, I'll try to respond to your points in plain-English speak not insurance jargon!

 

Insurance prices are reached by grouping together similar products e.g. a Home portfolio, a Contents portfolio, a Private Car portfolio etc. The price you are quoted will be based partly on the performance of the overall portfolio and partly on you as a specific individual risk. This means the price includes an element of the general risk (e.g. how frequently NZ houses are damaged by severe weather events) and an element of your risk (location, size, price, how close to a cliff edge etc). So the priciing is very local because it reflects the local risk in that NZ portfolio. It is not affected by overseas events. You are not paying for storm claims in Queensland for example. In the same way, Australians are not paying for the Cantebury EQ - the RBNZ ensures that a NZ insurance business is a standalone entity that exists in it's own right and prices local NZ risks in their own right.

 

The only way that offshore events could affect uis is perhaps indirectly. If global reinsurers have had a torrid time dealing with catastrophe claims all over the world then they might take a harder view of a potential NZ catastrophe. But the reality is the large size of the Canterbury events means the rest of the insurance world is learning from the NZ environment in terms of how to assess and pricve for EQ risk, not the other way around. So prices are going up in NZ purely due to the chain of events in NZ.

 

Its also worth pointing out that portfolios are managed separately. So whilst the C'church EQs have driven up House insurance, notice they have had very little impact on Car insurance - simply because cars are not at such large-scale risk to catastrophes like this. So your Car insurance premiums should not be increasing to cross-subsidise the House situation - they are managed separately.

 

Hence a Marine portlfolio is also run separately and needs to perform satisfactorily in it's own right. Imagine if you were an insurance company and you could only collect premiums from, say 10 multihulls and your charged a whopping $5,000 each - you would still only have collected $50,000. That is hardly going to cover the cost of a dropped rig let alone a total loss. And you certainly won't build up a healthy reserve of capital to keep you solvent on a rainy day. So such small numbers are scary to insurers (and reinsurers).

 

So yes, your offshore multis having accidents in NZ waters might make spectacular news but won't materially affect NZ marine prices. But if one of the NZ multis has a major claim and the pool is so small (you estimated 50, right) then yes that event would be noted by local underwriters and potentially fed into future price calculations.

 

And finally, yes pricing is determined by looking at different ty[pes of event scenarios and working out (1) the likelihood of each scneario and (2) the cost if it happened. This is discussed with the point-heads (Actuaries - I love them really) who use NZ risk models (not offshore data) to arrive at a recommended price. This is where the higher cost of multi reparis would come into things. They also include a degree of uncertainty in the price they arrive at - this tells you how confident you should be as an insurance co about ending the year with a reasonable (e.g. 10%) postitive profit margein if all things go as expected i.e. the number of losses is roughly as predicted. If we are talking about a large portfolio then the laws of averages are on your side and you have more confidence but if the portfolio is smaller, you have lower confidence. Which means you can either raise your prices even higher or decide that this would be ridiculous and stop insuring such a small portfolio altogether and concentrate on what you are better at.

 

So the small NZ multi pool is not a gripe (markm) but a statistical fact of life which means it becomes a specialist type of risk, to be handled by a select few underwriters. In the same way that classic car or high performance car insurance is specialised and not offered by 'normal' insurers but instead by a few specialist motor underwriters.

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markm

 

It seems we are largely in violent agreement and your last post demonstrates a better, more considered understanding of the true situation.

 

Hence I'll just pick up on a couple of final points of disagreement...

 

Insurance companies though are not risk takers, they in effect sell the removal of risk of certain events happening to individuals.

 

Insurance companies absolutely ARE risk takers. Insurance is TOTALLY a game of risk. You said it yourself - when someone buys car/home/boat insurance they are transferring the risk from themselves to an insurer by paying a premium. 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!!!

 

Point here is that it isn't the lack of statistical data that causes companies to avoid covering multis accept very indirectly, it's that they can't make the risk vs. reward equations come out with a high probability of profit. No criticism of companies intended, as commented it's their objective to be profitable and to minimise risk to that profit. To say there's not enough local statistical data is at best being a little deceptive in my view.

 

Wrong. You have correctly picked up that lack of pool size results in poor statistical average calculations resulting in poor certainty that a reasonable premium will give you a reasonable return. But remember that when calculating future premiums you are also looking (to a very large extent) on historic claims experience. Hence the small pool size hits your price modelling in 2 ways:

 

1. You have low confidence in predicting the future

2. You have low volumes of historic claims data to base your assumptions on - and what you do have has too many spikes (statistical noise) from a few large claims

 

.... result = low confidence in predicting a fair and reasonable price that would be acceptable to both customers and the insurance company.

 

You could invest truck loads of effort in importing an offshore Marine (or Multihull) claims experience model as a starting point, then trying to tweak it for local NZ market conditions but the cost would far outweigh the benefit when the potential target market is so small.

 

I'm not trying to hide something here or be deceptive. There is nothing to hide. It simply is a game of numbers and risk. The difficulty is that to answer a relatievly benign question "Why aren't multihulls easily insurable in NZ?" necessarily requires a somewhat detailed technical explanation to answer fully.

 

The simple answer is that there are not enough of them to make it viable. The reasoning behind that is the technical stuff we've discussed above.

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Yet, they do happily insure cats, but do not like tris. What I do not really understand is why there is such a distinction? If you have a cruising tri, why is it not a similar risk to a cruising cat?

 

And do they work out their risk assessment on different designs of keeler? Like, is it harder to insure a carbon fibre racing monohull that's say, 10 years old and now only really a fast cruiser, than an H28? :twisted:

 

M

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I admit i do not have the cloud high intelligence that is sometimes exibited on this sight.

and i do tend to use words like ass wipe occasionally.

 

But what I am reading here is Bunkim it all reads like some government spin doctor. Its business plain and simple, you want it, here it is and it will cost you this much, take it or leave it.

People have put words into my mouth, they must have cause they were big ones that I don't know. I can't be assed scrolling back through to refute them.

I can insure a Cat ( Multihull) I can't insure a Tri And that freinds is my bitch.

But Hell thanks for the lecture on Insurance, Iwill rest easy now knowing that there is a formula.

As usual I'm on the wrong side of the equation.

 

I also think that dreogitory remarks about H28's are very low and I realise which word that rymes with so don't go there either.

 

Liked your points Megwyn, well most of them 8)

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As usual I'm on the wrong side of the equation.

 

Join the club Offender. I, too am usually on the wrong side of the equation/fence/whatever.

 

But I don't care - we have more fun :wink:

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