The marine-insurance business is growing.
That’s according to Randall G. Carnahan, executive vice president and director of the marine unit for Gencorp Insurance Group. He reports a 20 percent increase in marine sales each year since Gencorp established a unit devoted strictly to marine policies three years ago.
Gencorp is licensed in 47 states, with four local offices in Rhode Island and nearby Massachusetts, and employs 61 people. As of 2010, the company had annual sales of approximately $10 million and is affiliated with virtually every domestic underwriter, as well as Lloyd’s of London.
PBN: When and why did Gencorp start a marine group?
CARNAHAN: It was started because we recognized an opportunity. … The marine group is part of Gencorp’s continuing development of expertise and specialty areas. As we developed our underwriting relationships and programs, we established the marine group three years ago. We have north of 1,000 clients today [nationwide].
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PBN: What kind of vessels and trades do you insure?
CARNAHAN: To use a marine cliché, we cover the waterfront, but we have a concentration in commercial marine insurance. I have a commercial background and just last year we hired two dedicated marine-group staff members: Doug Shaker, and he’s got an underwriting background both in commercial marine and yachts; and Kyle Audette, he’s a recent graduate of the Massachusetts Maritime Academy.
PBN: Do you insure everything from dinghies to yachts – and businesses as well?
CARNAHAN: Commercial marine is our main focus, I would say. We insure the tug and barge business, ferries, boat yards, boat builders, dealers, marinas. If it floats or is on the waterfront, that is our core concentration. Our policies typically include liability.
With Doug’s arrival and his background in yachts, we have been growing that aspect of it and we look at that as another opportunity, not only to serve our current clients who may own yachts, but to develop that as a further line of business.
PBN: Boat policies generally come with navigation limits. Tell us about that. PBN: Am I right in assuming coverage for the entire East Coast would cost more than Narragansett Bay alone? PBN: How do you assess the value of a boat? Mileage estimates, used in autos, won’t work. PBN: What do you insure against? Is a boat owner covered for weather damage, for human error and for hurricanes? PBN: I understand that Gencorp has three exclusive programs that are part of its marine group. Can you tell us about those?
CARNAHAN: When you insure your boat, underwriters ask you where you operate it. If it is simply in Narragansett Bay, then that will be noted in your policy. If it’s New England waters, say New York to Maine, that will be noted, and if you require the entire East Coast because you want to winter in Florida, that would be noted.
CARNAHAN: All else being equal, there would be an additional factor for that Florida voyage itself because, you can imagine, there’s probably more exposure on your trip south and, in the spring on your trip north, than sitting here in good, old Narragansett Bay.
This applies to the commercial realm as well because if you’re a tug operator and you’re operating strictly in local waters, then your policy will reflect that. But if you’re in the business of towing barges up and down the East Coast and maybe into the Gulf [of Mexico], that needs to be negotiated as well. It is not like an auto policy where you can drive your car to any old state you can get to.
CARNAHAN: There are a number of ways to approach it. One is the replacement cost, what it would cost to rebuild that vessel or go out and buy a brand-new one. But, for underwriting purposes, the insured value typically is what the market value is, particularly if it is an older boat. If it is brand-new, whether a tug boat, a barge or a yacht, well then, it’s easy: what was invoiced? What did [the client] pay for it?
But the further you get away from that brand-new sticker, the more of an issue the value becomes. The marine industry relies on certified surveyors who are trained and often have engineering backgrounds or maritime academy backgrounds.
They can go aboard the tug, the ferry, the barge, the yacht, and they can provide a report.
CARNAHAN: Coverage generally revolves around “perils of the sea” – that is the language found in commercial policies. Some yacht policies are on an all-risk basis, but [coverage] can differ from insurance company to company, so you really have to know the carriers.
The hurricane issue is another matter and that typically is handled by the deductible, so it is not a matter of whether [hurricane damage] would be covered or not. You’d typically have a higher deductible. A conventional deductible may be 1 percent of the value on the hull policy. Storm deductibles – for named storms – would range from 3 percent to 5 percent, sometimes even 10 percent depending on where you are located.
PBN: So if a storm does not have a name, you don’t get coverage?
CARNAHAN: No, you have coverage – with the lower deductible. Wind and wave action are, of course, perils of the sea.
So, let’s say if you had a $100,000 yacht and you’ve run aground or your boat smashes up against a dock or it collides with another vessel, and there is damage, a typical deductible would be 1 percent of the value, or in this case, $1,000.
But there may be a named-storm deductible of 5 percent. So, let’s say the boat was damaged by Hurricane Irene, that same claim would have been adjusted at a 5 percent, or $5,000, deductible that you’re responsible for, as opposed to $1,000.
CARNAHAN: With the addition of our two staffers and our underwriting relationships, we’ve created exclusive programs that we market nationally as part of the marine group. (We probably have more accounts in California than we do in Rhode Island.) These are other forms of marine policies for our commercial clients.
The three programs are: Harbor Guard, for boating schools and clubs; Harbor Pro, for marine contractors with up to $2 million in annual sales; and Harbor Tow, for quick assistance, like the AAA (American Automobile Association) of the waterways, if you will. •
