Owners Must Jockey For Thoroughbred Insurance

He noted that, "Back in the early 80s you would literally have 50 or 60 insurers all writing a percentage of one horse."

This means that a top horse such as Seattle Slew, the 1977 Triple Crown winner, might have been insured for about $60 million, whereas now, "You would struggle to get more than $30 million," he said.

Capacity is down for two reasons, he explained. Insurance for horses is not particularly lucrative because "self insurance acts as a break on the market." Since the coverage is not mandatory, some owners opt to self-insure and stop insuring when rates go up, which has led to a "catch-22," with more owners searching for alternatives.

The other reason, he said, is that since Sept. 11, 2001, insurance has taken a "major battering." Insurers pulled out of less profitable areas and "devoted their capital to areas where they were getting double-digit rate increases.

Joe Browne Nicholson, president of Nicholson Insurance Agency Inc., in Lexington, Ken., said that because premium rates are up 10 percent-15 percent over the past few years because of the lack of capacity, some horse owners are electing to self insure or seeking other forms of coverage.

Some innovative agents, he said, are placing clients on deductible plans or lowering the insured value. "Some people will elect to buy less coverage on the horse to keep the premium the same or have a higher deductible and maybe self insure the deductible," he explained.

Full mortality insurance, he said, applies when a horse has to be "killed directly or euthanized for humane reasons," and against any accident, sickness or disease.

He explained that if Bellamy Road, the horse owned by New York Yankee boss George Steinbrenner, injured prior to the recent Preakness Stakes race, had been euthanized as a result of its injury "there would be a payment of indemnity."

However, he said, if the horse "was rendered useless as a racehorse but was still sound enough to function as a pleasure horse it would not be covered–there is no loss-of-use coverage on race horses."

Colts that do well at the Belmont Stakes, Kentucky Derby or Preakness Stake races, he said, retire to stud "and their owners enjoy a windfall."

This kind of horse, he said would have stallion potential, and "We would like to protect them against any accidents, sickness or disease which would render them infertile and I would put that endorsement onto a mortality policy on one of these horses," he noted.

"When you get to this caliber, any horse that finishes one, two or three will have a demand by owners of brood mares, and they are going to come with their checkbooks in hand," he said. "So anything to protect that future income stream is important for an insurance agent to provide."