Yacht and motor boat insurer Navigator & General (N&G) has warned that changes to current rules which limit liability for ship owners will have a significant impact on claims costs for the yacht insurance market
Yacht and motor boat insurer Navigator & General (N&G) has warned that changes to current rules that limit liability for shipowners will have a significant impact on claims costs for the yacht insurance market.
Currently, rules on limitation of liability for maritime claims are governed by the London Convention 1976, incorporated in the UK by the Maritime Shipping Act 1995.
N&G said a protocol to the convention, which will come into effect before the end of May 2004, will significantly increase the limits on liability.
Under the existing legislation, pleasure craft owners can usually limit their liability for damage to property and personal injury to a total of 250,000 SDRs (special drawing rights of the International Monetary Fund), equivalent to approximately £210,000 at today's rate.
This figure will increase to 1.5 million SDRs under the new rules, six times the current limit, equivalent to approximately £1.26m at today's date, said the marine insurer.
N&G director Rod Daniel said: “The current limitation figure does appear low by today's standards and an increase has been expected for some time.
“However, combined with the dramatic rise in compensation awards in recent years and increasing compensation culture, yacht insurers can expect liability claims costs to rise significantly as a result.”
N&G said premiums for pleasure craft owners who have a higher exposure to third party risk, such as owners of racing yachts, speedboats and charter boats, could increase by between £100 and £200 per year for existing policyholders.
The company also warned that the higher limits will apply immediately once the new Protocol comes into force, meaning many policyholders will be exposed to the higher limitation before they renew their policies.
