How to help affluent clients protect their yachts

High-net-worth individual wealth has surpassed the U.S. $70 trillion benchmark, according to Capgemini’s 2018 World Wealth Report.

The question then becomes: How are successful individuals spending their wealth?

Increasingly, it may be on a yachting lifestyle. Whether getting into the yacht community for the first time with a “small” yacht purchase (typically under 25 meters) or upgrading their current mega-yacht (generally running between 35 and 40 meters long), the market is growing.

According to Bloomberg, the combined retail value of yachts sold in 2017 reached $2.9 billion, a 21% increase over 2016. Further, as of Q3 2018, the total number of super-yachts sold had already eclipsed 2017′s year-end total.

Coupled with the warmer weather, it’s that time of year when agents and brokers will be working with both new and experienced yacht clients to help protect their lifestyle. While an exciting time for your clients, it’s important to help them navigate the waters of yacht ownership and to understand their related exposures. Here’s how you can get started.

Yacht risks: Unchartered waters

As the marketplace grows, so too do the related risks. Much of this new exposure can be tied to advancements in navigation and the automation of sailing functions. In many yachts and large vessels, setting out to sea can seem as easy as pushing a button. For many inexperienced yacht owners, it can be tempting to play captain.

But when it comes to launching, steering, cruising and docking a yacht, there is much more than meets the eye — and imagine doing this in suddenly rough seas or high winds.

For those clients who own smaller yachts and want the experience of being at the helm, it’s important they enroll in the proper training. Through this process, they should get hands-on experience in docking, navigating turbulent water and handling emergencies. With this training, they can then begin to observe and work alongside a trained yacht crew.

For mega yacht owners, however, a captain is essential (and often required in order to obtain insurance). Hiring and maintaining a qualified and certified crew is crucial to ensuring a safe sailing experience throughout the voyage. This process shouldn’t be taken lightly, especially given that these are the individuals who will be responsible for operating and maintaining the vessel. Rather, the process should include interviews and background checks to ensure that the candidate has the appropriate experience for the position they are applying for.

That said, even once clients have hired an experienced crew to manage their yachts, it doesn’t guarantee smooth sailing. Rather, they then need to ensure they are complying with The Jones Act, the federal law that protects crews while on-board a vessel. At the highest level, clients should think of the Jones Act in the same way they would workers compensation — it affords injured crew the right to recover medical payments, lost wages, food and lodging, among other benefits, from their employer for illness or injury while the crew is in service to the vessel.

The Jones Act also gives the crew the right to sue their employer for damages arising out of an injury sustained aboard the vessel — this goes beyond what an employee is entitled to recover in a typical workers compensation case. If the yacht is traveling in international waters, similar protections are afforded to crew under the Maritime Labor Convention of 2006. To ensure compliance, clients should start by ensuring their crew has access to proper sleep accommodations, recreational facilities, health protection and medical care.

Help clients protect their investment

With many of today’s yachts customized down to the littlest details and built to clients’ specific desires, it makes sense that a one-size-fits-all policy won’t be sufficient to protect your clients’ investment.

It’s therefore critically important that you work with clients to find the right coverage and carrier.

Consider physical damage and liability

While clients might be familiar with the physical damage that can happen to their yacht — be it to the hull, engine, sails or other equipment or personal property — many overlook two related components.

First, the cost to repair and replace yacht components is rising, thanks to both the technology used and the labor required to install it. Thus, it is important to ensure clients are insured for Agreed Value. In the event of a claim, this means depreciation will not be factored in when determining the value of the damaged property. Additionally, it is important to ensure damaged parts are replaced with original equipment manufacturer parts, when available.

Next, clients need to be protected against liability in the event of bodily injury or loss of life of a passenger. While no one wants to think about that while relaxing in the sun, failure to address both exposures can leave clients facing significant out-of-pocket legal and medical expenses in the event of injury. If anything, all the new “toys” now packed onto yachts, including jet skis, underwater submarines and water jet packs, are only increasing clients’ potential liability risks, and it is important to ensure a client is properly insured for these exposures.

Are client lifestyles protected?

For successful individuals, yachts aren’t just million-dollar investments, they represent a way of life. They’re an opportunity to get away and spend time relaxing with friends and family — all while having some fun in the sun!

In the event of a claim, that means time they can’t spend time on-board. Thus, time quickly becomes of the essence for the client. Ensuring they work with a carrier that understands the necessity for speed, but doesn’t sacrifice quality, is important.

When working with a client to select a policy and carrier, be sure to ask about the claims adjustment process and associated stop-gap solutions. In some cases, as is the case with Chubb, carriers will even cover some of the cost for clients to rent or charter another similar sized watercraft if their yacht is being repaired due to a covered claim. This helps limit disruptions to a client’s yachting plans.

Being there in moments of need

Even with an experienced crew and proper safety best practices in place, accidents, such as fires, or natural catastrophes can occur. For example, clients or their captains may need to move the yacht out of harm’s way due to a fire or hurricane. Consequently, clients should seek coverage that provides reimbursement of costs incurred to haul, fuel, or dock the yacht.

Overall, these situations are stressful enough as is. Added anxiety about dealing with insurance can make a bad situation worse.

Helping clients pick an insurance carrier that is known for its specialized underwriting expertise and financial strength can eliminate this worry from the get-go. Instead, clients can focus on what really matters — ensuring the safety of their passengers and crew and, eventually, getting back to relaxing.

The first step to reducing risk for your clients is helping them understand the intricacies of what’s at stake, and the available insurance options. Once protected, your clients will be able to cruise with confidence.

Ana Robic is chief operating officer at Chubb Personal Risk Services. She can be contacted at arobic@chubb.com.

See also: 10 Tips for Crafting Yacht Coverage