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High rates on the high seas

 Another victim of the storms: Boat owners are finding their premiums on the rise, when they can get coverage at all.

By TOM ZUCCO
Published June 29, 2006

Nothing Richard Lonnon had seen in his 54 years on the water surprised him like what he found sitting in his mailbox three weeks ago.

It was a notice from the company that insures his boat: “St. Paul Travelers Insurance Company will no longer write insurance coverage for boats over 10 years of age for your mooring county in the state of Florida,’’ the letter read.

Lonnon, 70, of Treasure Island, is one of more than a million Floridians who owns a boat, in this case RickAPeg, a 17-year-old, 63-foot, Viking motor yacht that’s named after himself and his wife, Peggy, and is worth about $600,000.

Last year, Lonnon paid $3,592 for $500,000 worth of boat insurance. The only offer he can find now for the same coverage will cost him nearly $12,000.

He could get basic liability coverage for about $1,200, but it would not cover damage to the boat.

“If I lost the boat, I’d be down the drain,’’ he said. “I’ve had boats since I was 16, and never had a claim.’’
Lonnon’s case is an increasingly familiar one.

Like homeowners and business owners, boat owners are now facing the same soaring insurance costs and the same shrinking pool of companies willing to insure them. Add in rising interest rates for boat loans and diesel fuel costs that have doubled in the past year, and the perfect storm has formed.

“It’s definitely cut down the number of people out looking for boats,’’ said Bob Fillingham, owner of Fillingham Yacht Sales in St. Petersburg, “because you can’t get a boat loan without insurance. And 90 percent of our deals are done with loans.

“If you’ve got experience, if your boat is 10 years old or newer, and if you have a hurricane plan, you can probably find insurance.

“But at two or three times what it was a year ago.’’

A glance at some of the losses along the Gulf Coast from the past two hurricanes seasons tells the reason why.
If the estimated damage to recreational vessels from the 2004 storms was bad (Ivan $113-million, Jeanne $46-million, Frances $100-million, and Charley $71-million), the following year was worse.

Hurricane Katrina caused an estimated $700-million in vessel damage.

Most of the major players in the boat insurance industry, companies such as Allstate, State Farm and Progressive, also insure property, autos and other lines, said Jim Holler, senior vice president for Alexandria, Va.-based Boat U.S., the nation’s largest advocacy group for recreational boaters and an insurance agency with about 213,000 policyholders.

Just as homeowners are facing rising rates and limited coverage because of the hurricanes, so, too, are boat owners.

“It (the hurricanes) put a real hit on the insurance company’s profitability from the marine insurance books standpoint,’’ Holler said. “The reinsurance market has also been effected, and a lot of commercial risks like oil rigs, pipelines and commercial fishing also got hit very hard by Katrina and Rita.’’

The result, Holler said, is that a number of insurance companies have elected not to write new business in coastal areas, and the majority have raised their rates and imposed a higher deductible for named storms.

While no states require that boats be insured, either for liability or property damage, that doesn’t take away the need. Most marinas require at least liability coverage because one unsecured boat could damage a dozen others in a storm.

And most lenders require boat owners have damage insurance, much like a bank requires property insurance when issuing a mortgage.

To weather the storm, Holler suggests boat owners in coastal areas make sure they have a solid hurricane preparation plan to get their boat out of harm’s way should a storm approach.

He also recommended checking to see if a carrier has a haul-out provision, which could reimburse owners for part of the cost to have a boat hauled to safety.

“Nobody wants to see rates go up,’’ Holler said, “because that’s when people start to question whether they should remain in boating. But be prepared to pay a much higher rate than in the past.’’

For Richard Lonnon, that has already happened. Twice.

Several years ago, his property insurer dropped the wind coverage on the 20-unit apartment building he owns, forcing him to get the coverage from state-run Citizens Property Insurance.

The same week he got the notice about his boat, he also received a letter from Citizens telling him his yearly property insurance premium will jump from $4,000 to $16,400, likely forcing at least a few of his tenants to leave.

“It was,’’ he said, “not a good week.’’

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.

[Last modified June 29, 2006, 21:39:03]