Sails, whales and jeans — the risks of insuring racing and superyachts

Portsmouth will host the first round of racing in the 35th America’s Cup, sailing’s top competition, in July. Britain’s maritime capital is also home to the team of Olympic sailor Ben Ainslie, who is bidding to lead the first British team to win the trophy when the competition culminates in Bermuda in 2017.

Yacht racing is a combination of technology, innovation, skill and courage. The America’s Cup boats are the sail-powered equivalent of Formula 1 cars – so it’s perhaps no surprise that Ainslie has recruited two motor-racing veterans, Martin Whitmarsh and Adrian Newey, to run his team and help design his boat.

Just like with racing cars, yacht designers are forever trying to find ways to make their craft go faster. The America’s Cup boats appearing in Portsmouth are light, highly manoeuvrable double-hulled catamarans that literally fly across the water at speeds of up to 50 knots, thanks to thin carbon-fibre foils on which the boats sit when in full flight. They will also use wing sails, also made of carbon fibre and cutting-edge composite materials. The sailors can adjust these sails, just like an aircraft’s wing flaps, to create maximum lift to power the boat forwards at much higher speeds than the prevailing wind.

Watch Artemis Racing become the first America’s Cup challenger to launch its AC45 development catamaran in Bermuda ahead of America’s Cup World Series this October.

Riveting, but risky, sport

yachtBut, just like F1, yacht racing’s need for speed can be dangerous. The crew must constantly fight to prevent the boat from lurching forwards off its foils and somersaulting, potentially tearing the boat to pieces. Olympic medal-winning British sailor Andrew “Bart” Simpson, died in such an accident while training for the previous America’s Cup in 2013.

The innovative designs and use of space-age materials can cause insurers problems, says Paul Miller, Director of Underwriting at Hiscox MGA. Miller, an experienced yacht underwriter, runs Racecover, a specialist Lloyd’s facility for insuring racing yachts. He refused to underwrite the 72-foot catamarans that competed in the 2013 America’s Cup. “Their designs were too experimental. I wasn’t interested in insuring prototypes.”

However, Miller is in discussions with a number of the six teams competing in the latest event about insuring their craft. “The boats are smaller this time round, and their designers learnt a lot from how the 2013 craft performed,” he says.

He is keen to ensure that the quality of the boats’ construction is as good as their design. Although amazingly light and strong, carbon fibre can also be brittle, especially if flaws occur during construction. Miller is a proponent of specialist testing of those key components of the boats that endure most stress, such as the rudders, masts, keels and foils.

Miller agreed to insure the entire fleet of yachts competing in the current Volvo Ocean Race on the condition that all the boats were tested in this way. Volvo agreed. “We were happy because it meant that at the start of the race we had eliminated as far as possible any construction faults in these boats. Our role as insurer is to cover against unforeseen events, not a builder’s error.”

And there are plenty of unforeseen events to contend with in high seas racing. Sailing at up to 30 knots through a night in the Southern Ocean can bring unwelcome surprises, such as collisions with errant containers that have fallen off passing ships. Shunts with whales are also surprisingly common. “The crew can’t see a whale in the pitch black, and the whale can’t see them. Even though the whale might be minding it’s own business it will still make a hell of dent in the boat.”

Although probably not as big a dent as hitting a reef. The sailing community was astounded by the news that one of the Volvo contestants, Team Vestas Wind, crewed by some of the world’s top professional sailors, ploughed on to a well-charted reef off the coast of Mauritius last November. Luckily, no one was hurt. “I really never envisaged a claim like that,” says Miller. “It’s probably the most unexpected loss I’ve ever had.”

Swell time for superyachts

Although the excitement is building around the America’s Cup, yacht racing hasn’t been immune to the effects of the economic crash. But the super rich’s fascination with messing about with boats has endured, if not grown.

Miller has seen demand for insurance for these floating pleasure palaces increase over the past 15 years. “We now see the super rich use their private yachts more than they ever have in the past. That could be a factor in why they are building ever-bigger vessels. These ships are bristling with technology, so, in today’s digital age, a billionaire can run his business from the middle of an ocean just as if he were sitting in his office. Also, it’s a secure environment, which is an increasing concern for many of our clients. They have their own permanent and personal crew and security team, so many prefer to stay aboard their yacht rather than in a hotel during a business trip.”

Despite the recession, the number of new private yachts being built has continued to grow, with billionaires seemingly in competition to build the biggest, most lavish vessel. Marble baths, 24-carat taps, silk wall coverings, even their own mini-subs, are must-have items. The task of repairing and restoring these luxury items if damaged can be tricky for insurers – and expensive. Miller particularly recalls one claim, which resulted when someone fell into the water when boarding a yacht. The crew fished him out, wrapped him in a towel and gave him a reviving brandy. But the bedraggled guest left a blue puddle on the salon floor, caused by the dye in his trousers. The ruined handmade carpet cost €200,000 to replace. “You don’t expect rich people on a private yacht to wear cheap jeans,” says Miller ruefully.

Hiscox’s acquisition of R&Q Marine Services in March marks a new direction in the Group’s strategy.

The managing general agency is a market leader in insuring yachts and related marine activity has an excellent track record, led by Paul Miller, a 30-year veteran in this sector. The acquisition “is a natural fit for our brand,” says James de Labillière, Managing Director of Hiscox MGA. “It complements our existing business of insuring high-net-worth individuals and their belongings, while being a part of Hiscox will give Paul’s team new opportunities through our existing distribution network and client base.”

Hiscox MGA, a new independent business division, has been created to explore opportunities to reach Hiscox’s target customers more efficiently. The globalisation of the insurance industry and the internet increasingly offer underwriters the chance to exploit their expertise around the world. “We will look to use the best mix of capital to create the most beneficial solution for the client,” says de Labillière. “In a nutshell, if Hiscox doesn’t have the expertise or underwriting presence in a particular area, we will work with people who do, creating a seamless customer experience.”

The new division is currently in the process of developing plans to grow over the next three to five years. “The market is full of niche opportunities, in which very capable underwriting teams who provide specialist products need the kind of experience, capital and infrastructure that Hiscox offers, to take the next step in their development,” says de Labillière.


Paul Miller
Director of Underwriting - Hiscox MGA
020 7448 6427

James de Labillière
Managing Director - Hiscox MGA
020 7448 6810


Image credit: Comanche photos — George Bekris

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