Everything you wanted to know about marine insurance but were too afraid to ask: Q&A with Caryne Duvenhage of Club Marine
Historically has there been a speedy uptake of marine insurance in South Africa, or has it been a more gradual affair? Have trends been similar in the commercial and leisure sectors?
More companies and individuals have been insuring their cargo interests due to the hard hit reality of extensive losses caused by heavy storms and weather patterns experienced over the last two years; combined with the high crime rate in South Africa where theft, hijacking and riots are at high levels. The insurance market in our sector has not grown at a high rate in real terms because the economic challenges have had an effect on trade in general. The number of new boats being manufactured and bought has declined overall, being luxury lifestyle purchases for many.
ON the leisure side, what sort of percentage cover are we seeing? Presumably the vast majority of boat owners have insurance of one kind or another due to the size of their investment? And is there a legal requirement for some kind of third party indemnity insurance or anything like that?
Yes in general more people insure their new boats due to the size of the investment, however there is still a large proportion of boat owners with older boats and many second hand boat buyers who only operate on inland dams and rivers who do not always realise the true extent of their risk and feel that they are willing to absorb the most likely damages they may encounter. In brief the risk is more than physical loss or damage to your own vessel but also extends to liability claims where a boat owner may be held liable for having seriously injured a third party — for example another water-skier or swimmer. These liability claims are normally large and the expense of defending them can easily run into hundreds of thousands of rands. Not all facilities and marinas enforce or stipulate that the clients that utilise their facilities have insurance in place but this is scenario is slowly changing.
You make a distinction between private pleasure vessels, charter use and commercial fishing vessels: are there completely different marine regimes / products for these distinct sectors? What does it mean in effect?
Yes, they are in essence three separate products and carry with them many of the same, but also many different risk exposures. For example charter use vessels are for reward / business means but are used far more frequently, often daily, generally have crew employed, different skippers, fare paying passengers which also again exposes the boat owner to higher liability risks in the event any passengers are injured while on a charter.
Have there been any famous./infamous cases of uninsured vessels being lost / involved in accidents?
There were a numerous vessels lost or damaged which were not insured in two recent situations being the massive storm and gale force winds that battered Durban in October 2017 and then again in December 2017 when a tornado swept through the Vaal marina in December 2017.
Do you handle insurance against oil spills / other such accidents? Is this one of the more important marine insurance components?
This is more relevant to shipowners insurance which is dealt with predominately through the London market. We do however offer environmental and pollution cover to the larger Yachts especially those travelling in international waters.
How is insurance structured? Does one buy a package of policies or one policy that covers the key areas for each sector, ie with specific clauses for leisure boating etc, as opposed to a more complex suite of clauses for, say, a commercial fishing company with several vessels?
One policy can cater for an owner of many vessels ranging between jetski’s to motor yachts or sailing yachts. However a separate policy would need to be issued if certain boats are used for charter or commercial fishing purposes which would then contain the relevant clauses and provisions for that use or risk.
You referred to piracy insurance. Is this a relatively recent phenomenon? Has there been an increase? Also, has there been an increase within the leisure boating market? There were some high profile cases that shocked the boating world; did this have an impact on the leisure boating sector here in SA? What sort of insurance is available for this sector with regard to piracy? What sort of cover is there?
Our policies cover physical loss or damage to vessels for piracy but where clients are sailing internationally piracy cover is specifically excluded in piracy hotspots, as these areas can be avoided. Marine or watercraft policies do not provide cover for Ransom demands and for this clients have to purchase specialised Kidnap and Ransom cover.
You referred to International blue water travel certificate and skipper experience requirements. Presumably this speaks to the necessary requirements for marine insurance? What are some of the other requirements? Are there any problem areas in this regard, ie areas where potential clients come unstuck?
There are many factors we look at when underwriting these risks as yachts that sail internationally are exposed to many environments, heavy weather, different regulations in other territories, navigational hazards, being many thousands of miles away in the open ocean with any form of assistance often being days away.
Some criteria we look at are:
- Size and rating of the vessel
- Age of the vessel
- Flight Plan (Voyage plan)
- Territories being visited
- Experience and qualifications of skipper
- Experience and qualifications of crew
Boat owners typically follow their dream without necessary first getting the correct marine cover. Is this generally true, or the exception rather than the rule?
This is true to a large extent as many boat owners don’t always realise that you get specialised policies and insurance providers that specifically cater for boat owners and their unique set of risks. This is also important in that specialist providers have product specific knowledge in this field and are able to understand the risks and the claims, they understand their clients, the environment in which they operate and their needs.
a) You also referred to ‘commercial and demonstration on water and exhibition insurance/ . How do these fit in?
Demonstration policies are designed specifically for Yacht Brokers and Boat Dealerships and can include covers such as inland water demonstration, sea trials, on road and on water deliveries, courtesy cover and exhibitions.
b) Is there an issue that boat owners need to ensure their boats are property insured BEFORE they take possession, ie before sea trials etc. Or is this a matter for the boat builder? Is there a ‘grey area’ where there may be a dispute as to WHEN the insurance passes from the builder to the owner?
Insurance covers risk where a client has insurable interest or bears risk by way of ownership or contract, therefore usually the contract will stipulate at which point the boat becomes the purchasers risk. The moment the purchaser bears risk is when insurance cover should incept as the date of delivery and the date of transfer of risk may be at different points.
Are there any important regulatory issues worth mentioning when it comes to SAMSA or the Department of Transport?
SAMSA regulations applies to all owners of boats that operate on public or common waters to varying degrees according to the size, type, and use of a boat. The department of transport have relevance for boats that are towed on trailers where there are regulations in terms of the trailer being suitably manufactured to carry the weight of the boat / load, the towing vehicle having the correct towing capacity and the driver of the vehicle having the relevant license for the vehicle and load being towed.