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The concept of sink or swim may be coming true for some Lloyd’s syndicates that are being weighed down by unsustainable loss ratios in the yacht insurance market, according to a recent report from Superyacht News, which cited overcapacity and competition as the primary reasons for the gap between losses and premiums.
Natural catastrophes, particularly the hurricanes from last year, certainly haven’t helped the problem.
“The yacht insurance market right now is very unstable. There’s no question that climate change, the impact of Irma last year, [which] was the highlight storm, but there were other storms, has really put demand on capacity,” said Paul Mendham, president of Navis Marine Insurance Brokers.
“We’re watching what’s happening at Lloyd’s actively being a coverholder, and we’re concerned about what is coming down in the next three to six months related to rates and coverage changes. I’d say right now that’s the biggest piece that we’re dealing with. We’ve had hurricanes before, but we’ve not had hurricanes that have caused the magnitude of damage that we saw last year.”
Meanwhile, the rise of insurtechs and increasing investment in tech-based solutions across the industry have not impacted the marine sector in the same way.
“Marine is still very traditional. We don’t have the tech that other classes do,” explained Mendham. “I think we’d be one of the last classes of insurance to ever really get web-based except for yachts. For small yachts, it’s super easy to put that into a system, but a $15 million mega yacht – nobody’s going to write that over the internet, so our challenge is capacity in the market currently and it’s [Lloyd’s] compliance.”
Staffing and finding the next generation of marine insurance brokers is another load that small brokerages in this space have to carry.
“We’ve got a big age-out coming in the industry and I’m concerned about the backfill related to some of this expertise that we’re going to lose in the next five to 10 years,” said Mendham, adding that Navis’s strategy is to hire from the marine sector first and then train that individual on insurance, rather than hiring from the industry and training on marine.
“We still seem to find somebody who’s been in the marine industry for five to 10 years and has a marine understanding seems to be a better fit for us than necessarily somebody straight from college or straight out of a brokering program that doesn’t understand anything to do with the marine industry.”
