We ALL Must Learn the Lesson!
by Robert Holbrook
We have all no doubt read lots of articles concerning Hurricane Ivan. Many lessons have been learnt, the most valuable of which has been that EVERYONE - boat owners, yards and insurers - can no longer afford to be complacent about hurricanes and the hurricane preparedness of boats in the Caribbean.
There was a general misconception that hurricanes never happen south of 12°40'N. Ivan proved us wrong; an exceptional and unusual hurricane it may have been, but proof positive that a hurricane can happen anywhere in the Caribbean.
So where is the hurricane area? There is a lot of confusion about the "hurricane belt" being redefined, moving further south. Does it really matter where it is? Surely it is better for us all to work on the assumption that if you keep a boat anywhere in the Caribbean then you must accept that she could be damaged by a hurricane.
When an insurer decides the premium and terms to apply, they take into account many factors to establish the level of risk presented - the higher the risk, the higher the premium. It still remains a fact that hurricanes are more likely to hit within the area south of 35°N' and north of 12°40'N. Yet insurers are being blamed for "forcing boat owners" south of 12°40'N. There is a general misconception that all insurance companies are the same - they are not. Named Windstorm cover is available north of 12°40'N, but it costs more because the chances of a named windstorm claim are higher. Premium is always a deciding factor when a policy is purchased, and there was a move south because it costs less to insure a boat there. But is premium the only factor to be considered?
Boat owners carry out thorough research prior to buying a boat - she is your pride and joy! Insurance is needed for peace of mind and valuable protection, yet many boat owners in the Caribbean look at insurance as a necessary evil; a transaction to be negotiated and completed as quickly as possible. A purchase is made on price and in many instances policy wordings are not read, or conditions and exclusions understood. Many boat owners do not know who the ultimate insurer is, how financially strong they are and if they are officially regulated!
When a claim happens, the boat owner quite rightly looks to the insurance company, after all that is what we have insurance for! Your policy will pay for the reasonable cost of replacement or repair; the defining principle is that you will be placed in the same position after a claim as you occupied immediately before. There is, however, an onus on the boat owner to do everything possible to minimise the chance of a claim occurring. The cost of claims has a direct bearing on the premium which needs to be charged - after all, insurance companies are a business and want to make a profit; surely that is not unreasonable. There are no big profits to be made in yacht insurance, especially in the Caribbean; that is why the insurance market here is so small. It is logical to assume that no business will wish to continue to operate in an area that does not make a profit. So is the only answer that premiums "will soar" or take a "whopping hike"? Not necessarily. To keep premiums down we all need to work together to minimise the cost of the claims.
I was astounded on my first visit to Grenada immediately after Ivan to see roller-furling headsails, mainsails and biminis left up, and dinghies still on davits, all dramatically increasing windage. The lack of care taken in basic lay-up was amazing. Boats were placed too close together, propping was inadequate, masts were left stepped: it was inevitable that they would all topple like dominos. There have been a lot of articles published suggesting very logical and commonsense procedures that are easy and cost effective to implement - but they were not. Yet insurance companies still picked up the bill. It should not be for an insurance company to tell boat owners the basics of good lay-up procedure; your car insurer does not need to tell you how to park your car! If a boat owner wants to delegate this responsibility to a manager or a yard, they must ensure that their orders are followed at the time of lay-up. Good lay-up costs money or your time. If you do not spend it looking after your boat, you will pay it through increased premiums or through the inconvenience of having a claim.
Admiral Marine have been offering Named Windstorm cover north of 12°40'N for 15 years, monitor aggregates closely and have a good spread of risk. The company has always asked many more questions than any other insurers regarding the hurricane preparedness of boats. After Luís and Marilyn in 1995, they did not withdraw from the Caribbean as many insurers did; but instead introduced a hurricane questionnaire, which asked detailed questions about lay-up procedure, removing masts, propping, etcetera - one of the first companies to do so. After Ivan, and consultation with owners and yards, it has been revised. Admiral work with clients, listening to their plans and tailoring a policy for them, both north and south of 12°40'N. The efforts and interest Admiral show in their policyholders means they attract those boat owners who invest the time and effort in caring for their boats. For them, premiums will remain competitive and their care will be "rewarded" with improved named windstorm terms.
So what lesson have we learnt? Primarily we cannot live in hope that a hurricane will not hit south of 12°40'N again. As insurance companies, we must not overreact by excluding cover or withdrawing from the Caribbean, but similarly we cannot carry on as before. To avoid massive premium increases or indeed having no market at all in the area, we ALL - boat owners, yards and insurers - must work together to reduce the level of damage sustained to boats following hurricane activity. Hurricanes will always happen, but we can do so much more to limit the consequences.
Robert Holbrook is Managing Director of Admiral Marine Ltd.
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