The small-boat and yacht insurance market, despite a wave of sinkings and other damage from monster hurricanes, has seen surprisingly modest rate increases, according to industry professionals. However, some say this could change when the final loss tab for 2005 damages arrives.

Meanwhile, companies have been decreasing their vulnerability with higher wind exposure deductibles, sources note.

The most favored business, those in the trade say, is mega-yachts and craft located on lakes, where some find rates decreasing. Northern and West Coast business is also preferred, as some carriers limit the business they do in Gulf Coast states.

Where in the past deductibles for named windstorms were nonexistent or in the 2-to-3 percent range, they are now “pretty much 5 percent across the board,” and sometimes up to 10 percent, according to Spencer Lloyd, a senior vice president at Brown & Brown Marine in Ft. Lauderdale, Fla.

Debbie O'Sullivan, worldwide yacht underwriting manager for Chubb, said deductibles are used for the more expensive boats approaching $500,000 in value, ranging from 3-to-5 percent, but can run as high as 25 percent.

Mr. Lloyd–whose business niche is yachts with a price tag of $1 million or more–said the past three years had seen premiums rise 10-to-20 percent, but there has not been the “incremental increase seen on the property side in Florida.”

Given the amount of hurricane losses, Arthur J. Gallagher's Charlotte Edmonston said she is surprised by the current rate situation for small boats and yachts.

Ms. Edmonston–managing director of personal insurance services for Gallagher in Baton Rouge, La., which does 40 percent of its watercraft business with mega-yachts and 60 percent with regular-sized boats–said there had been some increases on yachts of 34 feet and bigger, but “below that we're seeing no movement whatsoever.”

She and others said the price impact from storms has been delayed because boat loss and damage claims have been a low priority. Gallagher has seen more claims the past 60 days than in the prior six months, while Brown & Brown is still seeing claims from Hurricane Wilma, which dissipated on Oct. 25, 2005.

“Once that shakes down, every market will take a look at their boat offering,” predicted Ms. Edmonston, who thinks there will be increases then.

Another factor noted by Chubb's Ms. O'Sullivan is that many marine insurers have yet to feel the impact of rising reinsurance prices, since marine treaties generally renew in April and August.

For boaters, in some areas the pricing outlook is friendly, according to Dave Vieregg, national sales manager for special lines at Progressive in Mayfield Village, Ohio. He said he expects rate reductions in the Midwest and on the Great Lakes. That vicinity has seen better loss trends the last few years and “we're trying to maintain market share,” he explained.

B&B's Mr. Lloyd said there are competitive rates for a New England boat that remains there for the winter, and even lower-priced coverage for craft on West Coast vicinities with no hurricanes and fewer rocks.

Progressive, meanwhile, has a coastal program that puts a moratorium on boats over 30 feet and over $100,000–in effect from Texas to North Carolina, according to Mr. Vieregg.

Tom Conroy, marine director for Markel American Insurance Company in Pewaukee, Wis., said Markel had a moratorium on Florida business after Wilma–but it has since been lifted. The company is writing the entire state now, but for one zone at the southern tip it will only provide boaters coverage without wind exposure.

Ray Stahl, senior vice president for INAMAR Recreational Marine, the ACE USA outlet, advised that the Florida marine insurance market tightened after 2004, and since Wilma hit, “boat owners can expect to see tighter terms and conditions and higher premiums.”

Among other difficult risks cited by Gallagher's Ms. Edmonston are new, wooden-hulled boats, for which she believes carriers fear “maintenance issues.”

Mr. Lloyd said insurers shy from covering big, high-tech sailboats, which carry the potential for a huge loss if they snap a $1 million carbon-fiber mast.

The pleasure boat that insurers find most alluring is the monster mega-yacht. “There are several markets aggressively insuring them,” reported Mr. Lloyd at B&B. At the same time, they are more restrictive. “Most now require a licensed captain in charge of the vessel at all times,” he explained.

Peter Lafontaine, vice president of marketing and business development for INAMAR, said in his company's book, most units are small-boat policies, but the largest percentage of premiums is from yachts–those 26 feet and above–noting that in the last year INAMAR made a concerted effort to get more into the mega-yacht market.

INAMAR, he said, is “one of the few carriers that has the capacity to insure those values,” adding that the niche is a “very profitable business.”

However, at least one producer strikes a negative note regarding the rates charged for giant craft. “We believe they are inadequate,” said Bill Oakerson, chief executive officer for Boat U.S., the Boat Owners Association of the United States.

Mr. Oakerson–whose boating organization acts as an agency and producer for CNA, insuring 220,000 members–says insurers underprice mega-yacht business because they are competitive and want the big premium dollars.

Meanwhile, small-boat owners who might face some difficulties in Florida have plenty of competition for their business elsewhere. Ms. Edmonston said insurers see that market as a “huge opportunity because the majority of boats are relatively new,” are easily hauled, and “their owners go get them when there's a storm.”

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