Will owners of Eu250 million-plus superyachts drop insurance as premiums spiral?

Industry experts are warning that megayacht owners may be facing insurance costs at “astronomical” levels.

The warning sees yachts over Eu250 million (or those 100 metres plus) as the area of particular concern.

“The market has shrunk dramatically,” said Paul Miller, director of underwriting at Hiscox Insurance. “It is going to be difficult. Bigger values for the foreseeable future that expose everybody’s accounts to its full limit are going to pay a premium.”

Ben Lind, senior yacht underwriter of AIG agreed: “When you talk about 100 metre-plus yachts you probably haven’t got that many options for insurance, so people are looking for a return for committing that much capacity.

“Premiums are going to be significantly more than they have been in the past few years.”

“There will be a pricing issue and capacity issue,” said Peter Mellett, managing director of BankServe. “Insurers will want to cover, but the issue will be whether the owner will want to pay the price and/or the underwriters will have enough capacity, premium income.”

Miller believes that the nervousness around the market has being building for a number of years: “It’s a period of three years where the market suffered heavy losses, but this is across everything – not just superyachts.

“But the yachts have been suffering badly, there have been a lot of big individual loses such as M/Y Serene.”

Lind of AIG echoes him: “Part of the problem is that if you look at the market it’s been losing money.

“For every dollar Lloyd’s writes it has been paying out more than two dollars in claims and expense. That’s why there has been a sudden change during 2018.

“People have been losing a lot of money for three or four years.”

With owners facing exorbitant premiums the reality is that many may chose to not cover their vessel or, instead, be lured to fringe underwriters.

Mellett said: “My worry is that owners will be driven off to poor capacity and to poor underwriters, those with no rating that look good but aren’t.”

Without insurance banks and lenders will not provide finance and ship-yards would undoubtedly be unwilling to accept yachts for repairs unless a letter of credit could be produced.

Experts advise that megayacht owners will need to buckle down for some turbulent times ahead in the insurance market.

“You’ll either need to build a consortium of various insurers to put their capacity together to take those big limits,” said Lind. “Or, the alternative is that you are going to have to find a single insurer who has enough capacity and financial strength to take the entire risk.”

Miller said: “The premiums are going to have to be more than double at renewal just to get them home”

“Higher premiums, tighter conditions,” concluded Mellett.