This is an overview for you of events of 2022 and what trends we’ve seen in the yacht insurance market. We started 2022 with some optimism, thinking that rating had finally stabilised after what can only be described as several volatile years in the yacht insurance market. Some of you may recall that this started with the extremely expensive hurricane events of 2017, which resulted in several long-standing and traditional yacht markets simply closing their doors and shutting shop.
Unfortunately this optimism for 2022 was relatively short-lived. Without wishing to step into the realms of political statements, there have been major world events and trends which, whether we like it or not, are currently impacting insurers and their views on rating. Specifically these events are the war in Ukraine, the resulting spike in global energy prices and the resulting different inflationary pressures in all walks of life.
So how do these specifically affect the yacht market? The inflationary pressures are most prevalent within the claims environment. Repair yards are already increasing hourly labour charges and for the first time in as long as I can remember, repair yards are now imposing time limitations on their repair estimates, as they are worried about the escalating costs of parts or materials that they’re required to purchase as part of the overall repair package.
In the last 12 to 24 months, we’ve also seen in the yacht market an increasing trend in a new type of claim. We’ve all become more conscious of our impact on the environment; there is undoubtedly a move towards making boating and sailing greener. More and more vessels are converting to lithium batteries or incorporating a wider range of lithium battery powered gadgetry. The net effect has been a number of large fire losses in a whole range of vessels invariably resulting in the total loss of the vessel. You will have seen a number of the highest profile of these in in the yachting press, although they always tend to focus on the highest value vessels. These are of course extremely dangerous events and we can only ever be thankful when there is no result in loss of life or injury. There have of course always been fires but anything that increases their frequency or severity impacts the wider market.
What do we expect to see for 2023?
There’s been an issue with under capacity in the yacht market for a number of years now. Without doubt, insurers did see an improvement in results in 2021 but have put this down to a blip known as Covid premium, as a lot of boats were effectively just laid up due to various restrictions imposed around the world. Some of this claims buffer was lost, when clients returned to their boats after months away. With the current underlying trends being inflationary pressure and increases in spiky large losses, we don’t see an improving picture of further capacity enter in the market until at least 2024 and therefore upwards pressure on rating is likely to continue. At Topsail, we try hard to shield you from this in in as many ways as possible; we have long-standing and solid relationships with several of the largest providers of yacht capacity. We remain more than confident that we can continue to provide you with a competitive offering for your insurance needs.
May I take this opportunity to wish you all a very enjoyable 2023 for whatever your boating plans may include, and please stay safe on the water.