Lockton launches parametric hurricane cover for docked yachts

By Henry Gale

March 3 - (The Insurer) - Lockton has launched a new parametric product for yachts in the U.S. that pays claims if hurricanes pass within a certain distance of a vessel.

NormanMax Syndicate 3939 and Munich Re subsidiary Great Lakes Insurance SE are providing capacity.

The product is available for pleasure craft and yachts with gross value between $1 million and $10 million, or a gross tonnage under 500. The maximum coverage limit is the lower of $5 million or 75% of the boat's value.

It covers vessels against named windstorm risks while they are docked at any of 2,457 marinas along the southern and eastern U.S. coast, or within 500 metres of a marina.

There are currently very few options for yacht owners to protect their vessels against hurricane risks while they are docked, Lockton said, with existing products tending to have low limits, high deductibles and onerous warranties and conditions.

Like many other parametric hurricane covers, it uses a "cat-in-a-circle" structure. This means a payout is triggered if the track of a hurricane meeting certain criteria (the catastrophe or "cat") passes within a specified radius around an insured location (the "circle").

Such parametric policies typically have a fixed insured location. Lockton's product pays claims based on the hurricane track's relation to where the yacht is docked, using automatic identification system vessel tracking.

The policy's pricing is also dynamic. The initial premium will be based on the "home marina" of the vessel, but the client will be eligible to pay additional premium or receive a return premium based on the vessel's location every day during the policy period, with 61 designated pricing zones along the coastline.

Hurricane Ian in 2022 damaged or destroyed an estimated 30,000 recreational vessels, representing more than $1 billion in damage, according to the Boat Owners Association of The United States.

The organisation previously estimated losses of hundreds of millions of dollars from 2012's Hurricane Sandy and 2017's Irma and Harvey.