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Marine insurance rates expected to rise after Sandy

Hurricane Sandy will change the way the way marinas are insured.

That’s according to Mark Yearn, marine insurance specialist at Norman Spencer Agency, who thinks that rates will increase nationwide and insurers might pay more attention to risk factors such as exposure and dock construction.

“It’s extremely difficult to make money insuring docks no matter where they are,” Yearn told Soundings Trade Only.

That’s not just due to Sandy; the last two years have seen increases in tornadoes, claims due to a drought, flooding, and more, Yearn said.

It won’t just be marina owners who see rising rates. The huge marine loss inflicted by Sandy will be felt by marine businesses and boat owners across the nation.

“The first thing marine owners have to focus on is the fact that their insurance is going to go up,” said Andrew Barile, a California-based independent insurance and reinsurance consultant.

“Everybody is going to have to pay,” Barile said. “The distribution system works that way. If the industry loses money, they’ve got to get the money back. Don’t forget some insurance companies didn’t pay one claim because they didn’t insure that kind of risk. But that gives them a good excuse to raise their prices, too.”

Insurers often don’t take into account the construction of docks when setting rates, several brokers said, and only sometimes do they take dock age and exposure into account.

“The evil truth is that the industry is woefully unsophisticated and the insurance industry is woefully undereducated about dock coverage,” Christopher Pesce, president of insurance underwriter Maritime Program Group, told Trade Only.

That’s partly because there are no data for dock construction versus survival in storms, Pesce said, adding that he has written policies for all kinds of docks that see claims.

But some predict that will change after Sandy, where owners with newer floating docks seemed to fare better than those with fixed docks except in the few areas that had almost 20-foot-tall surges.

BoatUS technical director Bob Adriance thinks exposure and age, as well as construction and materials, are critical pieces of dock survival.

“If you have floating docks with tall, 18-foot pilings, time and time again they go through the storms, the boats go up, the boats go down,” Adriance told Trade Only.

The problem with fixed docks is often the fact that boats have gotten beamier, Adrience said. That makes it difficult to tie the boat loose enough to give it slack enough to move with waves, but tight enough that it doesn’t bang against the sides of the dock.

Adrience said that every year boats drift off pilings that are too short and float away in storms, still tied to docks.

The silver lining is that marina owners will likely rebuild to be more storm-resistant, which will help when and if they are coming under more scrutiny from insurers, Adriance said.

— Reagan Haynes

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