Most of us will never have to worry about insuring a mega orsuperyacht, those sea-going crafts ranging in price from $50million to well over $100 million with hulls measuring anywherefrom 80 to several hundred feet long. But for those fortunateenough to own such a vessel, the insurance risks are very real andvery unique.

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According to Damon Hostetter, senior vice president at ACERecreational Marine (part of ACE Private Risk Services), thedifference between a yacht and a "super" or "mega" yacht centersaround the size and value of the vessel. Luxury yachts are usuallylonger than 78 feet and have a hull value over $5 million. A megaor super yacht generally runs a minimum of 148 feet (about half afootball field and that can be considered “small” as mega yachtsgo) and are valued at $50 million and higher. For example theOctopus, which was built for multi-billionaire Paul Allen,is 414 feet long (almost one-and-a-half football fields) and cost$200 million to build.

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Mega and superyachts are like luxury mansions on the water andmany of the same risks found in large homes apply to them, albeitwith some significant differences. Among the amenities frequentlyfound on mega yachts are private theaters, sauna and steam rooms,beauty salons, helipads, mini submarines, gyms or exercise rooms,multiple deck levels above and below the water line, conferencerooms, a medical area of some type, and cabins for guests andstaff.

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These uber yachts require a crew to navigate and maintain theship as well as a professional staff to oversee the day-to-daycare, cleaning and meal preparation. There are multiple safetyconcerns to be considered and assets to be protected, as well asenvironmental risks that must be managed.

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Here is a look at six risk management factors for mega yachtowners.

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mega yacht interior

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Photo: Travel Bug/Shutterstock

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1. Furnishings

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“The larger the yacht, the more assets aboard the vessel,” saysHostetter. “There may be artwork, furnishings, jewelry, winecollections and firearms on board.” He recommends that owners takespecific steps to prevent loss such as doing a complete inventoryand keeping the photos, videotapes and appraisal documents in asecure location somewhere other than the vessel.

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“Some items may not always be on the vessel and may betransported between the home and vessel. It is important to knowhow to pack and transfer items like wine and artwork,” he cautions.“They need to be secured and temperature controlled. Owners need tobeware of humidity issues and UV issues that will degrade theartwork.”

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ACE and other insurers provide coverage for furnishings (muchlike Homeowners Insurance), but recommend that additional coveragebe purchased for specific valuables such as wine collections,antiques, jewelry and fine art.

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yacht maintenance
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Photo: Jordi C/Shutterstock

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2. Crew & staff

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Superyachts require temporary crews at the very least and quiteoften a full-time crew of anywhere from three to 10 or moredepending on the size of the vessel. According to SuperyachtTimes, Paul Allen has a permanent staff of 60 for theOctopus. This brings into play Workers’ Compensation andmedical insurance coverage issues, particularly since these vesselsoften travel out of the country.

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Frequently, the country or state under which the vessel isflagged determines the safety regulations, Workers’ Compensationrequirements and other aspects of the yacht’s registration. “If itis a U.S. flagged vessel and there is a federal law for a Workers’Comp act, then that’s what’s followed,” explains David Kupfer,Esq., a member of the law firm of Carroll, McNulty & Kull.“Because we’re talking about vessels on the water they are subjectto federal law.”

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Health insurance is another consideration. “The owner can gethealth insurance that covers the crew wherever they are,” Kupferadds. “Owners liability will cover the crew when they are injuredon the vessel, but it’s not the same as a health issue.” If thecrew is temporary and works for a placement firm that provides themto run the yacht, then the employer is responsible for both healthand Workers’ Comp insurance.

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wave runner

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Photo: Muratart/Shutterstock

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3. Navigation, transportation and watercraft

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Most mega yachts have a variety of “toys” that require some sortof coverage. These include personal watercraft (e.g., jet skis), atender for transporting guests and staff from the yacht to thedock, kayaks, mopeds, motorcycles, golf carts, helicopters andcars. Navigation and transportation coverage will cover many ofthese items, but Hostetter says that some toys provide uniqueexposures that require additional coverage such as towing a secondvessel, parasailing, scuba diving and using submarines or othersubmersible crafts.

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Sometimes owners aren’t always the only ones using a vessel.“People don’t usually use their yachts 365 days a year, so in orderto try and generate income they charter them out,” explains Kupfer,“so the owners’ liability insurance has to anticipate whether theyacht will be chartered out and how long it will be used.”

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Policies frequently have navigational limits that dictate whereand when a yacht may be operated. “The period of operation is anissue too,” adds Kupfer. “If the boat is going to be principallyused in a specific geographic area like the U.S. or Mediterranean,then the insurer needs to know where it will go and how long itwill be used.”

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mega yacht bathroom
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Photo: Angelo Giampiccolo/Shutterstock

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4. Environmental spills

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Large vessels also need to insure against what Kupfer calls “theextraordinary risk for contamination of the environment.” Theprimary mega yacht policies cover for fuel spills and sewagedischarge. (A superyacht with multiple bathrooms, a large kitchenand other amenities can create a lot of waste.)

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Hostetter recommends conducting a survey each year to identifyany problem on the yacht. “There are multiple voltage systems onthe boat and it operates in a potentially harsh environment. Thereare complex engines and water making equipment aboard. Keepingtrack of all of those systems, as well as safety and compliancerequirements can be as complex as running a small business.”

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sinking ship
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Photo: lOvE lOvE/Shutterstock

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5. Property Damage

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Most mega-yacht policies will include hull damage coverage, aswell as third-person liability if the boat runs into another vesselor pier or injures someone. “Yacht contracts are comprehensive, sothey are pretty inclusive,” says Hostetter.

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“If the boat is in a collision, the owner may need to cover thesalary of the captain and crew while it’s in dry dock for repairs,”adds Kupfer. “There may also be governmental fines with a dischargeor collision that the policies need to cover.” The policies forvarious insurers are not identical and may have different coveragelimits and deductibles, but they usually cover first- andthird-party liabilities.

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Pirate ship and yacht
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Photo: Jess Kraft/Shutterstock

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6. Kidnap, terrorism, piracy and hijacking

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Another consideration involves geographic risks and exposure.Pirates are alive and well in some parts of the world and megayachts are attractive targets for them. “Parts of theMediterranean, Malaysia and Indonesia are less secure areas thanthe U.S.,” advises Hostetter. “Check with the U.S. government andState Department on any issues or travel advisories.”

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He also recommends that owners and captains conduct their duediligence on mooring locations. “Check them out ahead of time orhave a security firm assess the itinerary,” he adds. “Depending onwhere they are going, they could hire a security team to scout outthe area and possibly provide security while there.”

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Kupfer says there are policies that cover kidnap, terrorism,piracy and hijacking. He also recommends search and rescuecoverage.

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Most insurers that offer mega yacht coverage will customize itbased on the owner’s needs and the vessel’s amenities, where it isflagged and where it will be traveling. Deductibles run anywherefrom $50,000 to $100,000 or more depending on the coverageoffered.

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See related article: Managing the unique risks of yachtownership

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