The Underwriting of Yachts & Pleasure Crafts Munich Re / Zaris Seminar, Beirut 18 th October 2005 Laurent Biehly with Capt. Richard Chalhoub
The Underwriting of Yachts & Pleasure Crafts Definitions Insurance Conditions Underwriting Guidelines
Definitions of Yachts 17th Century : small sailing vessel used for carrying passengers 18th/19th Centuries : light sailing or steam vessel used for pleasure or for racing Today : any vessel used exclusively for private pleasure and/or sporting activities
Insurance Conditions Institute Yacht Clauses 1/11/85 and ancillary clauses NB : Except when an insurer insists, it is not compulsory to use the IYC 85
Institute Yacht Clauses 1/11/85 Clause 1 Vessel Vessel means : - Hull & machinery - Boat (s) - Gear and equipment such as normally sold with her if she changed hands
Institute Yacht Clauses 1/11/85 Clause 2 - In Commission and Laid Up In Commission : Vessel is free to navigate
Institute Yacht Clauses 1/11/85 Clause 2 - In Commission and Laid Up Laid Up : Vessel covered while laid up out of commission
Institute Yacht Clauses 1/11/85 Clause 3 - Navigating and Charter Hire Warranties navigating limits are restricted if beyond navigating limits : Assured to inform the company vessel only used for private pleasure purposes unless specially agreed by the Underwriters
Institute Yacht Clauses 1/11/85 Clause 5 - Speed Warranty 17 warranted designed speed limited to 17 knots should Underwriters agree to delete the above warranty : cover according to Clause 19 (Speedboat)
Institute Yacht Clause 1/11/85 Clause 9 - Perils Not an All Risks cover! Only named perils are covered!
Institute Yacht Clauses 1/11/85 Clause 9 - Perils This insurance covers loss of or damage to the vessel caused by : - perils of the seas, rivers, lakes or other navigable waters - fire - jettison - piracy - contacts with dock or harbour equipment/installation, land conveyance, aircrafts or similar objects or objects falling there from - earthquake, volcanic eruption or lightning
Institute Yacht Clauses 1/11/85 Clause 9 - Perils Provided not resulted from want of due diligence by the Assured, Owners or Managers Accidents in loading, discharging, moving gear, etc. Explosions Malicious acts Theft of entire vessel (securely locked!), theft of machinery/gear/equipments following forcible entry
Institute Yacht Clauses 1/11/85 Clause 9 Perils Provided not resulted from want of due diligence by the Assured, Owners or Managers, loss or damage to => motor and connections (but not strut and propeller) => electrical equipment, batteries and connections caused by => latent defect in hull or machinery, breakage of shafts or bursting of boilers => negligence of any person whatsoever
Institute Yacht Clauses 1/11/85 Clause 9 Perils (9.2.2, 9..2.2.1, 9.2.2.2) Clause 10.10 - Exclusions Clause 19 Speedboat Clause Clause 333 Institute Speedboat Clause Restriction of cover in respect of motor, connections, heavy weather, sinking etc. Clause 332 Institute Machinery Damage Extension Reinstate some covers excluded from clauses 9, 19 and 333
Institute Yacht Clauses 1/11/85 Clause 10 - Exclusions Outboard motor dropping off or falling overboard => Generally accepted Ship s boat exceeding 17 knots => Can be covered (clause 19 apply) Ship s boat not permanently marked with name of parent vessel
Institute Yacht Clauses 1/11/85 Clause 10 - Exclusions Motor and connections (damage due to heavy weather) => Machinery Damage Extension Clause (Cl. 332) Sails and protective covers => Limited cover granted (clause 10.4) Sails, masts, spars or standing and running rigging whilst racing => Limited cover granted (clause 10.5) => Racing Risk Extension Clause (Cl. 330)
Institute Yacht Clauses 1/11/85 Clause 10 Exclusions Personal Effects => Personal Effects Clause (Cl. 333) Consumable stores, fishing gear or moorings Sheathing or repairs thereto => Limited cover granted (10.8) Loss and expenditure to remedy in faulty design or cost incurred by betterment/alteration in design of construction
Institute Yacht Clauses 1/11/85 Clause 11 Liabilities To Third Parties This clause only to apply when a sum is stated for this purpose in the Schedule to the policy => TPL insurance is not compulsory => absence of such legal compulsion does not absolve the owner or operator from any legal liabilities to third parties
IYC 1/11/85 - Liabilities to Third Parties Cover for legal liability only in respect of : - loss /damage to any other vessel or property whatsoever - loss of life, personal injury or illness - removal of wreck / cargo - legal costs
IYC 1/11/85 - Liabilities to Third Parties Separated from H&M cover Claims are recoverable in addition to any other claims even in addition to a total loss. Loss must be added to any other partial loss claims
IYC 1/11/85 - Liabilities to Third Parties Sistership => collision / receive salvage same rights as with different owners => liability for collision or amount payable for services rendered Arbitrator (agreed upon between underwriters and assured)
IYC 1/11/85 - Liabilities to Third Parties Navigation by other persons with permission : covered not covered are persons operating or employed by the operator of a shipyard, marina, repair yard, slipway, yacht club, sales agency or similar organization.
IYC 1/11/85 - Liabilities to Third Parties Removal of Wreck Clause 11.1.3 Covers attempted or actual raising / removal / destruction of wreck of vessel or cargo as well as any neglect or failure to do so Clause 11.5 Removal of Wreck Extension Covers removal of wreck from any place owned, leased or occupied by the Assured
Exclusions IYC 1/11/85 - Liabilities to Third Parties => accident and/or illness covered under Workmen s Compensation or Employer s Liability any boat belonging to the vessel with a maximum designed speed of 17 knots (unless specifically covered) punitive or exemplary damages
IYC 1/11/85 - Liabilities to Third Parties Exclusions 11.6.3 Water skiing or aquaplaning 11.6.4 Sports activities Can be reinstated : => Water-Skiers Liabilities Clause
Institute Yacht Clauses 1/11/85 Clause 16 Unrepaired Damage => Reasonable depreciation in the market value of the vessel => No cover if subsequent TL (whether covered or not) during period covered => Liability not to exceed insured value at the time of termination of insurance
Underwriting Guidelines
Underwriting Guidelines Requested Information - name of the assured; - name & type & year of built of yacht insured; - subject matter insured (H&M, TPL, etc.); - sum insured and insured value; - times and date of attachment and termination; - navigation limits agreed with the insurer; - period of lay-up if any agreed with the insurer; - clauses that form part of the contract; - any other conditions, additional clauses or warranties agreed and/or by the insurers
Underwriting Guidelines =
Underwriting Guidelines - always apply a deductible - split of sum insured (Hull, engines, tenders, equipments) - TPL cover not to exceed twice the sum insured for H&M - ask for a recent survey - ask for statistics (premium/losses) over a 5 years period
Underwriting Guidelines - restrict the navigation limit to what your client really needs. Ad-hoc extension is always possible. - try to grant yacht cover to clients of your company only (moral hazard) - how about the skipper s experience? - remember : competition is healthy but good results are paramount!
The Underwriting of Yachts & Pleasure Crafts THE END