On the Harbor: What's new in the Marine Insurance World

 

Front Row: Left, Craig Chamberlain Right Charlie Bailey

Back Row: Left to right: Rob Lindley, Ericka Loomis, Juile Chamberlain, Keith Sargis

By LEN BOSE

Last May, I received a call from my good friend Craig Chamberlain: “Hey Len, work is getting in the way and I have to drop off the crew list for Transpac.” He went on to explain how the Marine Insurance business has been turned upside down, and he needed to stay in town to keep his company on a straight course. Chamberlain has owned his own marine insurance business for 38 years now under the name Novamar Insurance. You probably have noticed the sign, and office along Mariner’s Mile on Pacific Coast Highway. His wife Julie and I were both in the same second-grade class, although we didn’t know each other that well. She was at the front of the class, while I was in the back corner facing the opposite wall.

Now that the Chamberlains have their company back on the foils, I thought I would reach out to him for an update on the Marine Insurance business. When I asked the question, “What’s new in the Marine Insurance business?,” he explained the change in the market as simply as he could to me (remember I sat in the back of the class). With more than a dozen marine insurance companies leaving the market we have tighter markets, fewer participating insurance companies, tighter underwriting, and the remaining companies are being more selective with reduced capacity and higher prices. Reduced capacity because of fewer insurance companies writing yacht insurance. They say no, more often than they used to, and we need to submit complete underwriting packages to insurance companies to provide the best terms for our clients. If an agent sends in an incomplete underwriting package and the client is turned down, it is extremely difficult to send in additional information and try to turn that “no” into a “yes.” With fewer marine insurance agencies available, the remaining companies just can’t write billions and billions of yacht insurance. They have their capacity limits and can’t write billions of dollars of insurance on boats sitting in Fort Lauderdale should a hurricane come through. That lack of capacity has really affected the market.

I then asked how a customer should complete their due diligence before purchasing a boat? “Buyers should have a clear understanding of their insurance requirements before they start shopping, similar to getting prequalified for a loan. One doesn’t want to learn the fine details of their policy the day before the deal closes. In today’s world, it’s easy for owners to overbuy and not have the experience to run a 35’-plus boat. Many companies will just say no, other companies will require a skipper while the boat is underway for the first year or have the owner receive training, and be signed off on by their skippers, Chamberlain explained. He went on to share what underwriters are looking for today. “There are some variables. Let’s say the vessel is under 10 years old, or it’s a production boat that is used in our local water with an experienced owner…this will take two days to get a couple of quotes. If it is a boat over 10 years old, the underwriter is looking for a clean survey with a resume of the owner’s experience owning vessels of a similar type and size. A clean survey is very important, because up to a couple of years ago underwriters had a better understanding that 25-year-old boats will have a larger recommendation list. Today, vessels need to have a clean survey along with the owner having experience with that type of vessel,” Chamberlain said.

Boat owners have to keep in mind that the information they gave about their experience can be easily proven, or if they have a claim due to lack of maintenance, the insurance companies will not pay the claim or rescind the policy. Many insurance companies have made the wording of their contracts much tighter.

We both have the same opinion that sellers should take the time to get their boats ready for sale and the survey beforehand. The insurance agency’s largest concern is if the boat might sink or burn. For example, if there are bad thru-hulls, broken hoses, no hose clamps, bilge pumps that don’t work, leaky shaft logs, or unused wiring that has never been removed. These are the types of items that alarm underwriters, and they will just say “no.” In the past, brokers would work out a survey allowance with the buyer allowing some time to make the recommended fixes. That option is now becoming a thing of the past. This could lead to a problem for some sellers who find out they have a leaky rudder post during a survey and if they place their boats back in the water they don’t have any insurance. With today’s shipyards being weeks out before they can fit you into the scheduling, this can lead to a volcanic eruption for most sellers.

I asked Chamberlain the best way boat owners can maintain the insurance policy. “If something changes, and/or you leave your navigation area, you will need to update your policy. If you purchase a new dingy, contact your agent. If you update your fishing or diving equipment, jet skis, foil boards, deck slides, etc., make sure your agent knows. If any type of charter occurs, you will need to update their policy with a special endorsement. If there is any significant change, for example, if you re-power the boat, it never hurts to give updates to your insurance agent on what you are doing with your vessel. If you go cruising, advise your agent six months ahead of time, as they will want crew resumes and a general outline of your plans.

The Chamberlains are not paying me to write this story; we all know how closely knit the marine industry is and I have worked with them for more than 32 years myself. There are many reasons why I refer my clients to Novamar Insurance. All of their agents are boaters with a ton of experience and offices all over the country to help clients locally. Their Mexico branch started 12 years ago, is licensed in Mexico and has a staff of 15. If there is a problem in Mexico, it’s an advantage to their clients to have the local representation. Having an agent that can speak to the authorities or Port Captain can be helpful.

The Chamberlains have cruised Mexico, so I had to ask what their favorite destination was. “Playa la Ropa off of Zihuatanejo is pretty darn nice…we spent a month there. The whole Sea of Cortez is like one big anchorage – you are only a short distance from the next anchorage. It’s a pretty magical place,” said Chamberlain.

Sea ya.

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Len Bose is a yachting enthusiast, yacht broker and harbor columnist for Stu News Newport.