Founder and CEO of Hong Kong-based Voyager Risk Solutions, Ho spells out sometimes-unseen pitfalls to avoid with yachting insurance, in a Column for Yacht Style.

Tommy Ho, founder and CEO of Voyager Risk Solutions

Yachting is a glamorous recreation activity. Owners invest millions of dollars in their fun; and many rely heavily on their insurance policies to protect their investments. However, owners often lack a thorough understanding of the warranties and requirements associated with those policies, which can lead to significant coverage or expectation gaps when it comes to filing a claim.

Below are a few points that yacht owners should be fully aware of about warranties or obligations in their policies.

Complexity of yacht insurance policies: Some yacht owners assume their policy provides broad, comprehensive coverage, without realising the specific warranties and requirements they must adhere to. Overconfidence can lead to a false sense of security and a failure to actively manage compliance with policy terms.

Yacht insurance policies can be highly complex, containing customised terms with numerous exclusions, conditions and warranties. Make sure you fully understand these – ask the insurance company or broker about anything you are uncertain about before signing up.

Focus on policy details rather than premiums: When securing or renewing yacht insurance, owners may prioritise factors like premium costs and basic coverage limits, rather than thoroughly understanding the policy’s content.

This emphasis on price over detailed policy analysis can result in owners overlooking important warranty requirements. Proactively managing compliance with policy terms can help ensure that yacht owners receive the coverage they expect in the event of a claim.

Lack of communication with insurers / insurance brokers: Some owners may not maintain an open, regular dialogue with their insurance providers, missing opportunities to discuss policy changes and new requirements or clarify any ambiguities. Without this communication, owners may be unaware of evolving warranty standards or policy updates that could impact their coverage.

Select an insurance broker who is an expert in the yachting field – by recommendation from an owner you know, if possible – and who you trust to keep you in the loop with policy or legal changes that affect your coverage or premium. They can also let you know if a more preferable replacement premium comes to light.

Please note the following common, unexpected breach-of-warranty scenarios that could lead to the invalidation of policy:

Failure to properly maintain the vessel: This very common scenario might miss the typical requirement in yacht insurance to always maintain the vessel in a seaworthy condition. It includes regular inspections, routine maintenance and prompt repairs of any issues. Failure to adhere to this, even if not directly contributing to a claim, can result in the insurer denying coverage.

Failure to adhere to manufacturer’s recommendations: To properly maintain the yacht, owners should follow manufacturer-recommended guidelines for the operation, maintenance and repair of the vessel and its various systems, especially engine upkeep. Deviating from these guidelines could be considered a failure to maintain the vessel, thus a breach of policy.

Modification regulations: Flag-stated requirements and yacht-insurance policies often have warranties that prohibit the owner from making any modifications or alterations to the vessel without the prior approval of the flag state and/or the insurer. This can include changes to the hull, engine or other critical components.

Exceeding navigational limits: All policies have specific navigational restrictions. These may include maximum distances from shore, within a geographical area, operating in waters of certain boundaries, or requirements to obtain permission for extended voyages.

Failure to properly secure vessel: Policies often require the owner to take reasonable measures to secure the vessel when it is not in use. This can include ensuring it is properly moored at her home mooring or at a professionally run marina – or else coverage risks being denied in the event of theft, windstorm damages or other related losses.

Inexperienced or unqualified captain and crew: Policies often require the vessel to be operated by crew with specific qualifications and experience to operate the yacht. Most require the vessel’s captain and crew to hold the appropriate licenses and certifications for the type of yacht and waters in which they are operating.

Failure to update safety equipment: Policies often include a warranty to maintain and regularly update the vessel’s safety equipment, such as life rafts, emergency communication devices and, especially, fire extinguishers (we have seen too many fire incidents). Failing to replace expired or damaged safety gear can result in the policy being invalid.

Overloading or exceeding capacity limits: It’s usually prohibited for the number of passengers to exceed the limits allowed by the relevant port authority and flag-stated requirements. Exceeding these can compromise the yacht’s stability and handling, potentially leading to an incident.

Failure to maintain adequate documentation: Yacht-insurance policies may require the owner to maintain detailed documents, such as maintenance logs and crew records. Failing to properly document vessel operations and history can make it difficult to demonstrate compliance with the policy’s warranties.

Unauthorised chartering or change of use: Some policies exclude charter use of the vessel without the insurer’s prior approval. Unauthorised commercial use of the yacht can be considered a breach of warranty, even if a claim is unrelated to a charter activity.

Failure to notify insurers of incidents or claims: Yacht-insurance policies often require the owner to promptly notify the insurer of any incidents, accidents or potential claims, even if they do not result in an immediate claim.

TOMMY HO

With over 20 years’ experience in yacht insurance for high-net-worth individuals, Hong Kong-based Tommy Ho, founder and CEO of Voyager Risk Solutions, provides risk-management services including insurance for corporate and private clients. He also provides yacht financing through Beagle Asset Management and represents Electrine electric and hybrid propulsion systems. A long-time boat owner, he is a prominent figure in clubs and associations.

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