Power up with watercraft sales

Rough Notes, Feb 1999 by France, Larry

Opportunities include everything from personal watercraft to luxury yachts

In the past five years a strong economy and booming Wall provided an abundance of leisure dollars to spend on "toys" for adults. Real estate sales have soared to record levels and have included summer homes, cabins, and cottages on the water. With this prestige setting, you just can't have a 1963 Sears jonboat tied up to your $60,000 floating dock.

The choices of watercraft range from the personal watercraft (PWC) to multi-million dollar yachts. Approximately one million PWC are registered in the U.S., and sales of these fast and highly portable units had skyrocketed until recently According to Michael McGraw, COO of the McGraw Group, the largest writer of personal watercraft in the United States, several factors have contributed to a sales decline for PWC: rising cost of the units in the past 10 years, saturation of the marketand public reaction to the pollution problem. In 1999, PWCs are banned from operation on Lake Tahoe due to the chemical pollution.

Owners' homeowners policies provide little or no coverage for PWCs. Many specialty markets write a stand alone policy.

In the boat or ship category (the price determining which category applies) runabouts are the smallest of the craft. Runabouts usually fall under the 26 foot definition contained in the homeowners policy and are powered by outboard or inboard motors. Values will normally be under $30,000. In most cases placement for this watercraft is easy. The age of the boat, driving record of the insured, horsepower, and area of operation are major underwriting factors.

Yachts can far exceed $15 million in value, but unless you have an extraordinary client you probably will be in the $1 million and under class. The navigational waters of operation are of major concern as well as the mooring and storage location. Vessels used outside of inland water or located on coastal water are of a higher risk and will draw the underwriters' attention. Several markets specialize in this exposure. Personal property associated with owners of yachts can be extensive. Depending on the market, some coverage is included in the basic policy form, but increased limits will need to be evaluated.

Houseboats are gaining not only in ownership but as rental units for vacationers. As a rule, houseboats are more difficult to operate so the experience of the operator is critical. Considering the bulk and weight of the hull and the engines of up to 400 horsepower, this craft is not especially responsive to tight turns or quick stops.

Houseboat values can readily exceed $100,000. Some are used as a residence in the coastal areas, and coverage for this exposure can be placed through several markets. Rental operators can obtain cover to protect themselves, not the renter. Packages include liability, hull damage, and premises liability plus optional coverages. Markets will require a written agreement from the renter to contain hold harmless language.

Boats over 25 years of age, wooden hulls, and custom watercraft are classified as antique or classic. Markets exist to accommodate this segment either through MGAs or associations who endorse specific programs for their members. Two such organizations are the National Chris Craft Club and Antique Boat Club.

Other types of watercraft exposures include sportfishing operators, watercraft rental, charter operations, water taxis, and jet pump boats. Limits for liability up to $1 million are easily attainable, and physical damage is usually written on an ACV basis. Optional coverages offered are medical payments, towing, mechanical breakdown, sports equipment endorsement, and non-owned watercraft.

Each market listed has responded to our survey. A description of its operation, contact person, limits, target markets and other information pertaining to the watercraft market follows.

American Yachts, Ltd.

711 West 40th St., Ste. 356

Baltimore, MD 21211

Contact: Suzanne Redden,

President

Phone: (800) 909-7899

Fax: (410) 243-2659

As an MGA for Underwriters Insurance Company, an A-rated carrier, they operate in all of the continental U.S. Target markets include pleasure boats over 26 feet and $50,000 in hull value with $300,000 to $800,000 as a prime target.

Arlington & Roe

8465 Keystone Crossing

Indianapolis, IN 46240

Contact Janet Phillips, V.P.

Personal Lines

Phone: (800) 878-9891

Fax: (317) 259-4106

E-mail: janetp@ arlington-roe.com

Operating in IL, IN, KY, and OH, this MGA utilizes A-rated carriers Cigna, Markel, and American Modern Home. Target markets are yachts, bass/pleasure boats, limited commercial, PWC, and houseboats.

Burns & Wilcox

30833 Northwestern Hwy., Ste. 220

Farmington Hills, MI 48334

Contact: Bill McCord, CPCU, Vice

President

Phone: (800) 521-1918

Fax: (248) 932-9040

E-mail: email@burnandwilcox.com

URL: www.burnsandwilcox.com

This program is available in 41 states (excludes New England, AK, HI and NY.). Various A-rated carriers including American Modern Home, Jefferson, and Lloyd's are utilized to provide limits of up to $100 million. Several markets are available for excess claims, nonstandard construction, excess speed, cruises, charters, and high limits on PWC.