Offshore Cruising Insurance – why don’t insurance companies share my dream?

Any experienced boater has likely felt the pinch of higher premiums and tighter underwriting requirements than in past years. With inflation affecting every aspect of our lives, we should not be surprised. Specific to yacht insurance rate hikes, greater frequency and severity of hurricanes and tornados, higher vessel repair costs, supply chain disruptions causing delays increasing claims costs, and higher litigation expenses play their role in the tight insurance market. That explains why local yacht insurance is challenging; but what has changed in the offshore cruising insurance market causing premiums to increase and availability to decrease even more dramatically over the last few years? The answer is all of the above PLUS a few other exposures boaters that stay close to home don’t typically face.

Offshore or away from marinas and boatyards mean you are on your own when a problem strikes. No tow boat service to call on channel 16, no salvage companies, no boatyards to haul for repairs, no marine electricians, riggers, plumbers, mechanics. Off the grid and on your own exploring the less traveled corners of the world is great - until trouble strikes. Normal repairs become so costly or impossible to carry out in remote areas due to lack of services, normal claim related repairs can turn into a constructive total loss for the boat owner and the insurance company – or the boat owner if uninsured. For the reasons above, and due to very poor loss experience, most marine insurance companies no longer insure boats travelling more than a couple hundred miles from their home port, or outside US waters, or offshore more than 200 miles. This leaves a few remaining insurers that have a couple of options to be profitable enough to continue insuring this group of boaters. And the underwriters often ask for lots of information: recent vessel surveys, rigging inspections, cruising itinerary, crew resumes, absentee owner questionnaires/caretaking arrangements if the boat is to be left unattended for more than two weeks at a time.

What each of us boatowners can do to create stability in the insurance marketplace is to do everything possible to minimize preventable mistakes that lead to insurance losses. Every time a claim is paid, the premium pool gets drained a little more requiring higher premiums to be paid by the cruising group to keep the program afloat. Or another yacht insurance company withdraws and reallocates its capital to other lines of insurance. The only other available options are for insurance companies is to reduce coverage contractually, i.e. higher deductibles and more coverage exclusions. At Novamar Insurance we insure thousands of boats. In addition to dozens of small losses, over the last 6 months our clients have experienced 4 different preventable large losses in remote areas costing over $3,000,000 in claims payments, which caused a major sucking sound at the bottom of the premium pool. With some planning, all four losses could have been prevented. Interestingly, two of them were groundings that occurred thousands of miles apart, during broad daylight, with very experienced boaters aboard. Both of those “hard spots” in the ocean did not show up on the insureds’ electronic charts. According to their chart plotters, both boats were in deep water at the time of their groundings. Not to mention, longitude on electronic charts in particular can be off by several miles. However, chart guides did show the reefs clearly. Luckily no one was seriously hurt.

The takeaway, ALWAYS refer to at least two independent sources and keep a lookout at all times. Relying on information displayed on one electronic chart and letting otto steer a course with no eyes on the horizon has led to many unfortunate vessel losses. The other two preventable losses were due to boats anchored in unprotected coves in remote areas that occurred a few months apart. Basically day anchorages that turned into lee shores when the wind changed in the middle of the night. Their anchors dragged, and before the boat owners were able to get the engines started, the boats were on the beach. Luckily no one was hurt, but getting off the boat and into the water at zero dark thirty in the middle of nowhere is something to be avoided at all costs. Very simply, if the boat owners recognized a change in wind direction would put them on a lee shore, they could have re-anchored in a more protected cove for the evening. Or an anchor watch should have been used with an exit strategy in place i.e. weigh anchor, plot a course out to sea into deep water and wait until daylight to re-anchor in a more protected cove.

This blog is not meant to beat up these boatowners for their mistakes, just the opposite. After many years of mostly drama free cruising it is easy to become complacent. All four of these boatowners are very experienced cruisers. It is meant to be a reminder for all of us that Murphy is out there ready to pounce, and it is up to us to do our best to keep him out of our premium pool.