By Pantaenius Insurance, Australia
A year ago, the idea of a boom in superyachts would have seemed like a work of fiction. Yet the pandemic has supercharged yacht sales from the smallest boats to the largest superyachts as people seek private space, travel and family time on the water.
The market in superyachts has become so heated that brokers are experiencing a shortage of inventory. According to the US National Marine Manufacturers Association (NMMA), the recovery in the US led to a 9% increase in sales last year – and there is no sign of slowing down. The frenzy in the US market is having a knock-on effect in Europe, where there is now also a shortage of brokerage boats.
Anyone looking at building a new yacht is looking at delivery times as far ahead as 2026. In the face of such a long wait, many new owners are buying older yachts instead, either out of choice or as an interim vessel. Research conducted by Boat International shows that the average age of yachts sold has increased this year to 13 years. Among yachts dating back further, there are some comparative bargains to be had: yachts between 30 and 40 metres have been known to change hands for under $2 million.
This surge in new owners is a boom for the industry. It is introducing many new people to the pleasures of yacht ownership, and some of these will go on to commission a new build. But there are also concerns that less experienced owners may not be well-advised about the true costs of ownership.
A yacht that is older may need a costly refit or be more expensive to run. It also incurs many of the same fixed costs as a new boat. Some costs, such as insurance, may be higher and a more significant percentage of the purchase price. “A new owner needs to be fully aware of the running and maintenance costs, and the general upkeep of the yacht,” says Michelle Van der Merwe, Pantaenius superyacht account manager.
As well as fuel, marina and berthing fees, there are the crew salaries and regular routine repairs and maintenance, plus any refits or refurbishments that are planned. There is also the annual insurance premium that protects the owner’s asset, the liabilities relating to the operation of the yacht, and the crew and guest welfare.
“As an insurance company, we are also interested in the long-term running of the yacht, where the yacht’s home port will be, who will be manning the yacht when the yacht is not being used, and whether there is sufficient crew during this time, as well as the planned maintenance regime,” adds Van der Merwe.
Mike Wimbridge, managing director of Pantaenius UK, says, “The first thing to note is that it is possible to insure any yacht. We understand that there are people who don’t want to wait two, three or five years when they could be out on the water this year or next, and many people who are buying these assets are well aware of the costs – and understand that they may stay unchanged as they go up the value scale.”
However, Wimbridge points out that older boats can be more expensive in some respects. “You may need ten times [the purchase price] to keep things moving,” he comments. “We always say that, as a rule of thumb, running costs are about 10% of a yacht’s value every year, but not with an older boat – you may need to spend at least what you paid for it in a year.”
“From an insurance point of view, a concern we have is that some owners may be unaware of the costs of owning an asset like this and may look to cut corners. Older yachts may not have been refitted for some years. They may have ageing machinery, equipment that expires, and need more specialist work. That is the underlying story.”
Wimbridge says that those who are well-advised by brokers and agents understand the trade-offs being made, but admits, “Sometimes, it is a difficult discussion. You are trying to explain why there is a reason for a $50,000 deductible, because that is what a minor claim could be. The numbers do become bigger as the percentage of the risk becomes higher.”
Van der Merwe says, “If a yacht is to be used for charter, this also needs to be taken into consideration.” There are insurance considerations for commercially registered yachts, including higher premiums for liability insurance, charter guest accident and medical cover, medical cover for race crew or day workers, and whether the owner would like to insure named loss of charter, which can be a very expensive cover depending on the cost of weekly charters.
“These all need to be discussed with an insurance partner, and it really highlights the importance of having a good provider who can be there at any time to answer questions, make sure the cover is adequate, and react quickly if there is a claim. We offer a full package of cover and make recommendations.”
For more information and advice about insurance, visit www.pantaenius.com.au
Published in print January-March 2022
