Catastrophes have marine-coverage costs on the rise

HIGH TIDE: Wickford Boat Rentals owner Dave Fetherston, a former lieutenant in the U.S. Navy and a licensed boat captain, is facing insurance premiums up to 18 percent higher than last year’s rate. / PBN PHOTO/MICHAEL PERSSON
HIGH TIDE: Wickford Boat Rentals owner Dave Fetherston, a former lieutenant in the U.S. Navy and a licensed boat captain, is facing insurance premiums up to 18 percent higher than last year’s rate. / PBN PHOTO/MICHAEL PERSSON

Seven years into what he says is a thriving boat-rental business that offers eight sail and power boats, Wickford Boat Rentals owner Dave Fetherston got a notice from his insurance carrier that he was being dropped.
“I had no damage in Hurricane Sandy because I pulled everything out of the water and put it in a warehouse,” said Fetherston, a former lieutenant in the U.S. Navy and a licensed boat captain. “I’ve never incurred a loss and never submitted a claim, yet they dropped me.
“They said, basically, they weren’t going to insure businesses like mine, just as I was coming up on my Aug. 8 renewal date,” said Fetherston. “It was a little tense. I wasn’t sure if I’d be able to get insurance, and if I didn’t, I’d have to shut down for the remainder of the season.”
With business up 13 percent in the past year and a schedule that runs through Columbus Day, shutting down was not an attractive option.
“We had to scramble, but my broker found me another carrier. My insurance went up 18 percent over the previous year,” said Fetherston. The company’s insurance costs had varied slightly in past years, but usually related to the number of boats in the fleet.
Even so, Fetherston decided 18 percent wasn’t as dramatic an increase as might have been, considering conversations he had with others in marine-related businesses.
“Hurricane Sandy has had a huge impact on the recreational marine industry. I’ve heard there were people in the marine industry who had their insurance canceled after they made claims,” said Fetherston. “I’ve heard, anecdotally, that some people were getting increases from 50 percent to 150 percent.
“In order to mitigate that type of huge increase in rates, I had to present a whole plan to the underwriters that had my storm plan, my requirements for people to rent boats and the availability of training for people who are not experienced, to show that I was a low-risk profile,” Fetherston said.
For others with marine-related businesses and for boat owners, the insurance situation is still swirling with uncertainty and, in many cases, increased costs. “For marinas and yacht clubs and the like, flood-policy rates have gone up substantially,” said Dawn Speros, senior yacht agent for the Gowrie Group in Newport.
“Underwriters are in the midst of discussing how they’re going to handle policies related to hurricanes that come up the East Coast post-Sandy,” said Speros.
“We are still writing checks and at this point our agency alone has paid out $62 million in boat and property claims – that’s just Sandy-related claims,” she said.
“We are the largest independent marine agency in the country and as a result, we have waterfront homes, high net-worth individuals, we have marinas and yacht clubs,” said Speros. The Gowrie Group has 25,000 clients, with more than 1,000 of those in Rhode Island.
“The yacht clubs got hit. The marinas got hit. Obviously, waterfront homes were hit, up and down the East Coast, and, of course, some 2,500 boats,” she explained.
“Until those checks have gone out and everything settles down, only then can we come together as an industry and try to figure out how to mitigate those losses in the future,” Speros said.
Marine-related, waterfront businesses are going to be affected by being in a flood zone and the overall increase in rates, and boats are getting their hefty share of increases, she said.
“Waterfront businesses, I would say, could see increases up to 30 percent,” said Speros.
The Gowrie Group negotiates with underwriters to get better rates based on the business’ longevity and losses over a period of time, she said.
“On boats and yachts, we’ve seen increases anywhere between18 and 35 percent,” said Speros. “We’re fighting hard and we’ve been delivering to our clients between 12 and 15 percent.”
Many clients who took steps to make their boats safe during Hurricane Sandy are frustrated because others who didn’t take precautions had their boats damaged or caused damage to other boats, she said.
“Everyone pays for them not coming down and exercising their due diligence. That’s what we’re going to try to kibosh,” said Speros. “If a client doesn’t exercise due diligence to keep their boat out of harm’s way, I personally feel, along with many in my industry, they should not be paid for their loss, because the folks who are doing the right thing are also getting the rate increases and that is not making them happy at all.” Waterside is going to bring even higher insurance costs in the post-Hurricane Sandy reshuffling.
“Most impacted are going to be waterfront businesses that have wharves and docks,” said Speros. “These restaurants in Newport where you sit out on the harbor and watch the sunset, they will be impacted. Some have not been able to absorb the increase because the business over the last five years has not been that good in Newport,” said Speros. “This was a good year. The boat show had an excellent year.
“But I think some of these businesses may struggle as we go forward,” she said, because at some point, rate changes are going to start coming out in droves.
“We’re just at the tip of the iceberg,” continued Speros. “Some companies have taken the increase and some haven’t. Some may wait until the entire year is over and take a look at the totals and then negotiate.”
Insurance prices, including marine insurance, have increased slightly because of the recent catastrophes around the world, said Peter Plumb, president of the wholesale division of East Providence-based Starkweather and Shepley Insurance Brokerage, Inc.
“It’s a matter of how much capital the insurance companies have been paying out for claims,” said Plumb. “And they don’t make as much money on investments now.”
Starkweather and Shepley’s marine clients include commercial fishing businesses, charter boats, marinas and boat builders, said Plumb.
“It’s the catastrophes. It’s not one event or change,” he said.”Irene and Sandy certainly had a big effect on us, but it’s the brush fires in California and the flooding in Colorado. Those impact the overall cost of insurance.
“It’s what’s happening on a global basis,” said Plumb.”We really live in a global insurance world.” •

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