Marine Insurance: One size doesn't fit all!
by Mark Jardine 5 Feb 04:00 PST
Working on a yacht in a boat yard © Stoneways Marine
A huge part of the work at Stoneways Marine Insurance is supporting the infrastructure of the sailing world, the marine businesses that create, maintain, store and provide for the yachts and pleasure craft which we enjoy on the water.
I spoke to Keith Lovett, Senior Underwriter at Stoneways, to find out how this is done, especially taking into consideration the scope of the marine industry.
Marine trades and companies range from sole traders through to corporations employing many thousands of people.
Keith gave a unique insight of the continually evolving trade:
"The industry as a whole is a huge infrastructure, going from every component to every completed boat, on to the sales agents, then those who manage the boats that we all own and enjoy, from servicing to mooring, to sales, and providing fuel to go into your diesel tanks.
"Nothing stands still with technology, and an important area that we've been involved with is the R&D that goes on behind the scenes, such as electric-powered yachts and foiling motorboats. There is an entire micro industry behind all of that at the moment, developing different designs, working with leading sailing and motor yacht manufacturers. The same goes with other alternative propulsion systems, be that batteries, hydrogen or whatever it might be."
This huge range of skill and product immediately throws up the problem facing marine insurance - the fact that one size doesn't fit all:
"In the insurance industry we've seen a lot of big providers relying on tools that are used in the automotive industry for the provision of insurance. If you look at the types of cars that are available in the UK, it's a relatively tangible number. If you look at the types of boats available to buy, you run into the millions, which makes it far more diverse and complicated than in the automotive industry."
The skill then comes in recognising the differences between companies, and where they are at risk. This is where Keith and the team at Stoneways, with their vast experience, come into their own:
"Particularly at the larger end of the marine industry you will not find two businesses are alike. Even if you look at the big motoryacht manufacturers, the Fairlines, Princesses and Sunseekers of this world, the business models are radically different. Having an understanding of what they're doing and how they're doing it is absolutely essential. In my view, the only way to do that is to get right under the skin of those businesses, spending time with the people - because people are the businesses - getting an understanding of what their intentions are, what their plans are, what they're thinking of doing and how they're doing it.
"The problem is anybody running a business has an expectation that others understand what they're doing, but they're all different. The classic example, which we see all the time, is two marinas alongside each other. They could be on a South Coast location, they could be on the West Coast of Scotland, and those two marinas perhaps look very similar. They both have yacht berths, they both have berth holders, they both have a little boat yard, and you might think they're very similar risks, but they are often actually so different. One could be leasing a pub and a restaurant to tenants on a self-insured basis, the other one could be running a yacht brokerage and be the biggest seller of a brand of motorboats, so you end up with two incredibly diverse risks. The only way is to sit down primarily with the people, get a real understanding of what they're doing and how they're doing it, and spend time at the site to understand what they do.
"From a risk perspective, you can almost guarantee that those managing the risk will not understand where some of their heightened risks might lie. Therefore, you end up becoming an integral member of their team, highlighting where the highest levels of risk might lie. They then have a decision on whether they wish to mitigate it by arranging insurance or whether they carry the risk themselves. The key is that they then can make an informed decision."
Keith's example of a marina with a boat yard brings up the point about outsourced contractors, who will often be working on boats in the yard:
"Fundamentally, most of the people working in most boat yards aren't employed by the yard or marina. There are exceptions, but generally most commercial boat yards will allow a plethora of entities to come onsite to service that client base, which are the boat owner, and again, no two are the same. Very few of them will understand exactly where their risks lie, so they need somebody alongside them who understands exactly what they are doing, how they're doing it, and can advise them - giving them an opportunity to pass that risk on to an insurance company, should they choose to do so.
"If you walk into a typical boat yard, you may pass a foiling Moth that's tied down next to a motor yacht on a trailer, and then a line of 40-foot sailing yachts. If you look at the requirements of those owners to service those boats and supply everything then it beggars belief, and there isn't an industry like it."
Events are a huge area of sailing, and the variety of craft and people, congregating in one area at one time, is incredibly diverse. While each yacht and owner will have their own insurance, the event itself needs insurance which is another major area of business for Stoneways Marine, as Keith explains:
"Just like the marine businesses, no two events are the same. Understanding what the organisers are doing, where their liabilities lie, whether there is perhaps any personal liability resting with the officers, management, or directors, and putting that into context - so that you can underwrite the risk - is fundamentally important. It's something we've done for years and years. Again, it's back to people. An announcement is made about a new tour or event, or even an existing event, which may be changing form in some way.
"Unless you spend time with the people, understanding exactly what they're doing, one or two things are going to happen: Either they are going to be chronically underinsured, because the risks haven't been identified, or, because they haven't understood exactly what's happening, they could end up buying insurance far beyond what they actually require."
It is apparent that the key to suitable insurance is specialist knowledge, talking to the people, and honing their specific requirements, which is the Intellectual Property which Keith and the Stoneways team have built up over many years, but requires an absolute passion for boating:
"Our business is split into two entities: looking after the motorboat and yacht owners, and the trade side. I personally manage our trade account and have been in the marine industry since the late '70s. There are many types of marine business that I see nearly every moment; I'm on a boat, under a boat, in the bilge of a boat or out sailing, racing, or motorboating. It's something that is absolutely intrinsic in what I do and how I do it.
"I love getting under the skin of a marine business that I haven't personally seen before. When somebody asked me to go and look at their marina insurance, and I haven't been to that particular marina before, that's what excites me. Looking at how they're running it, what they're doing, where the exposures lie. And then if you can direct them and highlight something that they hadn't thought of, and they're very grateful, that's when I get a buzz out of it.
"Our Yacht Manager, George Beevor is a lifelong sailor and multiple Fastnet veteran. On motorboats and sailing yachts there's not a drive unit or configuration that George hasn't come across before - I've yet to catch him out. We are all intrinsically linked to, and passionate about, the boating world."
We're living in the age of filling in an online form, adding our credit card details, and clicking submit for many things in our lives, whilst there is undoubtedly a place for such an approach, there are also vast areas of the marine industry which can't be covered adequately by that. This is where a team with the passion of Stoneways is needed:
"Due to the specialities involved, there is a fairly high probability that you might not buy something that actually meets your requirements, which means that to a certain extent, your money could be being wasted. Alternatively, you might be buying something far over and above what you actually need, so you could be spending money unnecessarily. Unless you can sit down with somebody who can explain what you're buying, why you're buying it, if you're wishing to mitigate loss, or perhaps give you the choice not to.
"A classic example might be a boat manufacturer who might choose to insure factories in different locations. Eager to ensure that they could maintain their business should there be a terrible loss at any one location. Looking at the business and a realisation that all locations are reliant on one component being provided by a third party in a yet a different location. What we don't know is whether that one component manufacturer is adequately insured and even if they are if they had a significant loss there, could the component, still be supplied?
"The solution might be for the boat manufacture to arrange insurance on the named supplier, should they have a loss, but ultimately, the final solution may not be insurance at all. If the manufacture could produce that component themselves or identify another supplier, if they do, they have mitigated the risk.
This can only be identified by looking at the risks to the business. Whilst they could put production in place, it might take them some time to do, if we therefore insured their key supplier, if they were unable to get their component, they could at least hopefully maintain their business."
There will be many marine businesses reading this article who will now be questioning their own insurance and requirements, so I asked Keith how most businesses approach him to start the conversation about their cover:
"Nine times out of ten, we start with a phone call, and have a talk through where their concerns are, getting a bit of an overview of where the business is. It doesn't have to be onerous, I ask them to write down everything that their business does. That in itself can be a bit of an eye opener.
"We then work out where we think the risks lie, and ask where they think the risks lie, and then look at how we manage that. All businesses carry some risk, and we don't mitigate all of them with insurance. Like the example above with the third-party produced component, the ultimate solution might be to change a risk area."
Having the conversation can help business owners understand their own companies better, and inherently make them better prepared:
"There are straightforward businesses that can buy a very straightforward product, and we'd still be delighted to help them, but just having that health check, which we do time and time again, going through the profile of a business, where the risks lie, is no obligation to that business.
"If it transpires that their insurance arrangements are well structured, they're buying the insurance they want, then that's fine and we're delighted. If not, we're here to help."
Why not see if the team at Stoneways Marine Insurance can help you? To discuss your requirements, you can contact them on 03333 609 886 or email
Find out more at www.stoneways.co.uk