Calm after the storms?

A dry, impatient wind that blew over the warm seas off the coast of Africa in 2017 stirred up clouds and rain showers at first, then squalls, followed by thunderstorms. At first the pattern seemed innocuous. Nevertheless, meteorologists were watching closely. Although it was only late summer, the 2017 hurricane season was shaping up to be unusually active, and this was already a worry. At first just a trough of low pressure, what was to become Hurricane Harvey started as a tropical wave on 12 August. Within 12 hours it had intensified into a storm and was gathering itself ever vaster energy by the hour. It was a season that wouldn’t quit, and one after another storms formed and tore west. The US National Oceanic and Atmospheric Administration was on high alert. Alongside their gargantuan supercomputers crunching out high resolution forecasts, they needed to gather real-time data. Sortie after sortie, their specialist ‘hurricane hunters’, flew more than 500 hours in Orion P3 aircraft, punching through the eyewall of a succession of monster systems to probe for the data needed to calculate the likely path and amount of rainfall.

It was a year people in the Caribbean and the east coast of the US – and certainly everyone in the insurance business – will long remember. In seven weeks between 17 August and 2 October 2017, three hurricanes ranking among some of most powerful in history, Harvey, followed by Irma and Maria, tore through the Gulf of Mexico and the Caribbean, and made landfall in the US. These three were among the five costliest hurricanes in history; a Lloyds report estimated damage totalling $265 billion. The scenes left in their wake in the Caribbean islands of St Maarten, the British Virgin Islands, Antigua and Domenica are of devastation that no boater will forget.
 

The repercussions of these massive wind storms are still being felt today. Mike Wimbridge recalls the effect it in the offices at Lloyds in London, where he was then working – he moved to become managing director of Pantaenius UK two years later. Marine Yacht underwriting took “a hit of hundreds of millions of dollars”, he says, and forced a change of thinking that filtered down quickly to hit the pockets of boatowners. The hurricanes whipped up their own perfect storm in the world of insurance, and soon underwriters were fleeing the market and premiums were soaring.

“In the preceding years, hull underwriters, who insure all things boats, from oil tankers to ships, started looking around at others charging higher premiums asking themselves why don’t we get that business and more and more capacity flooded into the market. That drove premiums lower and lower. It was almost a race to the bottom,” recalls Wimbridge. “Then these three storms happened.” Afterwards, with underwriters facing huge losses, Lloyds stepped in and demanded that syndicates cap the marine business they took on. They began scrutinising their business plans. “It was a big control-alt-delete moment,” Wimbridge says. “Lloyds said: either prices have to go up substantially or we won’t allow you to write the business. Suddenly a lot of capacity left.” Some decided marine yacht underwriting was no longer for them, the margins too high or the liabilities too great. The specialists that remained in the market began to increase premiums. In some cases these were easily doubled, and policy conditions narrowed so owners were hit with restrictions, exclusions, lists of places on cruising routes which would no longer be covered. Insurers became more cautious about risks, and began cherry-picking, so that a yacht with a history, a bespoke boat, racing yachts and others became much more difficult to insure. The winnowing process also exposed the fact that some insurers just did not have the right expertise to react quickly to a claim.
Suddenly there was a big sea change.
 

In contrast, this period of disruption left Pantaenius little changed. The company German businessman Harald Baum first joined in 1963 is a rare species in the insurance world - it has been owned by the Baum family for over 50 years, and is run today by the next generation, Baum’s children Daniel, Martin and Anna. The company was established as a marine specialist and has consolidated its expertise in this area. Most people who work at the headquarters in Hamburg (or the offices in the UK, Sweden, Denmark, Austria, Spain, France, Italy Monaco, Poland and Australia) have a personal link with boats or sailing. The Baum family are all keen sailors and still own and sail Elan, the S&S Swan 48 that Harald Baum bought some 30 years ago. 

When the storm broke over marine underwriting, Pantaenius were in a position to stand firm. The companies they work with are European so they did not suffer the same losses or the same repercussions as in London, where underwriters were grappling by wider losses such as for cargo or flooding or wild fires.
Premiums and cover stayed stable. “The company had been around for a long, long time; our model is different,” says Wimbridge. Insurance companies appreciate that their customers are unlikely to get exhilarated by what they offer, but in a world of unforeseeable risks, excitement is not what anyone needs. “Insurance is a risk transfer mechanism, it’s boring in nature, but it needs to be reliable – you buy peace of mind,” says Wimbridge. “You want stability and longevity, and we are offering insurance that is cost stable in a world that is changing, and we have very longstanding relationships with customers.”

Pantaenius has more than 100,000 customers worldwide and covers boats of all sizes, from small craft up to megayachts. Boats of all kinds are constantly evolving in terms of complexity, whether that be machinery, electronics and build materials, and insurance cover is adapted and reviewed to fit with that. 
 

After a period of recovery, accompanied by more stringent rules, stability is returning even at the biggest end of the market, although insurers are much fewer for yachts of very high value. “There was a capacity problem for the megayachts due to their insured value, but we are finally getting into a more stable insurance market with premium levels that are more sustainable,” observes superyacht account manager Michelle van der Merwe.

“We at Pantaenius have been in a very good position during this time, due to our fixed relationship with strong A-rated German insurers and our business model, offering full in-house claims management to handle claims quickly without the multi-party process other brokers may have.” The company has doubled down on its reputation for robust, dependable insurance in some of the most remote places that owners increasingly want to explore. “That is one of the key strengths of Pantaenius: finding insurance solutions for the most demanding of itineraries,” says van der Merwe. Understanding people’s problems is half the solution. Pantaenius continues to concentrate on direct relationships with customers from their office network, and in eight different languages. Claims are dealt with throughout with a single point of contact. When you call, you are dealing with an employee in the office of that country, stresses Mike Wimbridge. He takes his turn on the 24-hour service, covering for colleagues when needed. “If you have a problem at three o’clock in the morning, you are phoning one of us. Last week it was me. We really are very happy to go the extra mile.”