Subscribe to The Risk Rundown on Apple, Amazon, iHeart, Spotify, or YouTube to listen to and get notifications for each episode release.

Katie (00:00):

I think the misconception is that we think in catastrophic events when it comes to a yacht, like, you know, a fire or sinking, something that's gonna happen out at sea. The more risks are everyday operational use, human error, human injuries.

Julie (00:20):

Welcome to The Risk Rundown. I am Julie Rison, and I am joined today with Tyler Banks and Katie Johnson. It's great to have you two here. Thank you for joining.

Katie (00:28):

Thank you. Hi, Julie. Hi, Tyler.

Julie (00:30):

So, Katie Johnson helps lead our yacht practice here at Alliant and works very closely with our private client team on those types of exposures.

So Katie, I know that we spend a lot of time with you, and I know that Tyler has a couple yearning questions he wants to ask.

Tyler (00:47):

You know, you and I recently had an opportunity to go to the Newport Beach Yacht Show together, right? It was, it was an incredible event to kind of see the West Coast and the yachts.

Where does your love for yachting and your love for, you know, providing solutions for these very complex yachts? Where does that come from?

Katie (01:05):

I first got into this industry in 2003, and I will just say that one of the, one of the most well-respected people in this space hired me and trained me and gave me that drive because people that do what we do have a passion for this.

And so it was just so contagious, and the enthusiasm that the team that I worked with had, that I wanted to just soak up every single thing about it. And the more I got into it, I learned that no two accounts are the same, no two boats are the same, no two owners are the same, and every day is different.

And I'm still learning after doing this for 23 years. I still come across things that I've never seen before or I haven't done before, or somebody wants to go to some very remote place that nobody's ever done before. So to me, the more problematic, the more complicated, the more
complex, that just drives me to try and figure it out.

So, that's where my passion comes from. And tell me I can't write something or tell me there's no market for it, or tell me that I can't go after that, that new build coming out of Germany, and I'm all over it. So it excites me because this is such a passion asset for our clients. And so for me, I wanna be able to take that off their plate and solve this problem and put this program together for them so that it's one less thing.

Tyler (02:34):

Can, can you share one? Can you share like a complicated risk or a complicated placement that you did that was kind of really interesting that you got involved in?

Katie (02:43):

So I will say one of the more challenging placements is when you have an owner that wants to take his vessel through the Northwest Passage. So the Northwest Passage is going through Canada, and you start over on the Pacific side, and you go across, and you come out over on the, on the eastern Atlantic side. It's a very treacherous voyage. There's so many requirements and qualifications, and not every vessel is built to do that.

And in my experience, the clients that wanna do that don't have vessels that are built to do that.
So, that is a challenging placement. Have I been able to find solutions? Yes. It takes a very long time and a very well-structured plan and a lot of different resources that have to come together outside of the insurance carriers.

Julie (03:34):

Yeah. Can I take a step back for a minute? Because we like started talking about yachts right from the get-go. But a lot of our viewers may not understand the differences between the sizing, the values, like what a boat is versus a yacht versus a mega yacht versus that kind of thing.

Can you kind of walk us through that?

Katie (03:54):

So, I don't think there's any real defined term for what a yacht is and what it isn't. In our world, a lot of underwriters think of a yacht as somewhere, you know, over 60 feet and has a full-time captain. You know, a full-time captain. It's when you think of a yacht, it's something that probably the owner is not gonna get behind and operate.

Other carriers might consider an 80-foot to be a yacht and anything less than that. So, there's really no definition in place anywhere. It's just kind of like a rule of thumb. When you get over 100 feet, you know, you definitely have to have a captain and a couple crew. And then when you get into, I would say maybe something in excess of 150 feet, you know, a super yacht.

Mega yachts get into the over 200 feet and up. And again, there's no clear line in the sand as to what that is, but when you get into fully captained crew in excess of, you know, a half a dozen or something, then you're getting into larger risks and much larger vessels.

Julie (04:51):

For the people that aren't going through the Drake Passage or the North Sea or, you know, these, these dangerous parts of the world, what are you seeing more—the questions that they're asking the most? Or the questions that they should be asking that they aren't asking with regards to exposure and liability and that kind of stuff?

What are you seeing that they are either missing out on or that they should be asking?

Katie (05:15):

Well, so I think a lot of clients, you know, you have the asset itself, and the whole coverage for the asset is a given, the physical damage part. But I think the bigger exposure is definitely all the liabilities.

So, when you, when you have an asset of this value and this caliber, you have liabilities, the owner has liabilities to the crew. He has liabilities to the operations and to third parties if he, you know, signs contracts for repairs or refit. Liability to damage to others, you know, whether it's a dock or other vessels, or you're sitting in a shipyard and you're gonna have hot work performed and there's another vessel next to you.

So, there's so many more liabilities that could escalate so quickly. I think the misconception is that we think in catastrophic events when it comes to a yacht, you know, a fire or sinking, something that's gonna happen out at seas or something that's gonna make the headlines like a windstorm or some sort of weather event, when actually the more risks are everyday operational use, human error, human injuries, you know, crew injuries, guest injuries, and things that go wrong in a shipyard.

So these are just the regular operational usage of the boat, which is actually more of a liability than anything else.

Tyler (06:36):

You know, Katie, it's interesting because yachts often are seen as, like, freedom and privacy and, and lifestyle, right? That's why a lot of our clients choose to purchase yachts and, you know, yachting is obviously a lifestyle that is very complex.

You've got people, property, travel, contracts, maintenance, crew, guests, jurisdictional issues as you kind of go from country to country. You know, so obviously as clients are going into the the yachting world, from your perspective, what kind of education should they be doing or are they doing before they are acquiring a yacht?

Katie (07:19):

Well, I think if you're a first-time yacht owner, I think surrounding yourself with some trusted
advisors in the yacht space. That's gonna include a yacht management company, your yacht broker, who's the one that's showing you the vessels and differentiating the vessels on the market or building a project manager if you're gonna have a built, you know, a new boat built.

A good insurance advisor, somebody that specializes in yacht insurance in that space, in that space only. So I think it's a lender, if there's gonna be a lender involved, you know, usually a specialist in marine lending. So if you surround yourself with the right advisors, all of those people -- a good maritime attorney as well.

You surround yourself with those people that can help you and guide you into a very large purchasing decision. I think that's half the battle in educating. And then you have seasoned owners who this isn't their first rodeo. They've done this multiple times, whether it's reselling or refitting or new builds.

Still having the right team around you to structure the right program and to understand all the nuances that come along with owning a yacht is more than just the actual price tag. That's just the entry point. You know? The price tag is just the entry point of the economics of the whole operation.

Tyler (08:38):

So, I guess a two-part question. How often are your clients chartering their, their vessels? Maybe some reasons why behind, you know, the reason why they would be chartering their vessel. And I guess lastly, you know, could some of the exposures that comes up from chartering your vessel as well?

Katie (08:57):

So, I would say maybe, I don't know, between 30 and 40% of our clients charter their vessel.

Julie (09:05):

That's more than I thought it would be, to be honest.

Katie (09:07):

And it's usually the vessels that are over, I would say, 120 feet, they're gonna possibly charter. Anything less than that, it's probably gonna just be private and they're gonna just use it for family and, and friends. But the reason most owners charter their boat is simply to offset the cost to operate the vessel.

You know, the annual operational expenses continue to rise, so whether the boat is sitting at a marina and not being used, they still have to pay for that boat to be provisioned, to have the crew full-time, to have fuel, all the maintenance that comes along with keeping a boat like that operational. So those expenses don't go away.

So, by chartering the vessel, they can offset some of those costs. So, it kind of creates a little bit more complexity than just having your own family using the boat, and you want to make sure that you're protected against these additional risk factors.

Julie (10:04):

You know, you and I, and I know that you've had these conversations with others as well, but we've talked multiple times how insurance policies are not all created equal, right?

And there's a lot of things that go into the coverages, the claims experience, what carriers will approve certain navigation areas. I mean, but the coverages on policies are not created equal, and so it's really important to be able to have a Katie Johnson, right, to be able to speak with clients about the differences in coverages can— and what the, you know, the pros and cons are for both.

Can you just- briefly talk about what are the main coverage differences between policies that you want somebody that does this all day, every day, right? That knows how to place this coverage.

Katie (10:52):

So, I would say, you know, you've got some flexibility in the yacht space. So you've got carriers, and while they have a policy form, you know, there's ways to be creative and come up with manuscript language if you're working with a carrier that has the ability to do that, which usually our domestic carriers do.

They can come up with some manuscripted language depending on the situation or what you're
asking for. Some flexibility, I would say, in the London marketplace too, that you can do that. As
far as major differences, they're all agreed value policies, the hull policies are, so it's just a difference of some might not cover manufacturer and latent defect, whereas some will.

Some might limit tenders and toys to actual cash value and not have, you know, agreed value on
those. Some might exclude windstorms. So there's, there's so many different variables. You know, underwriters like a clean risk, so if you tee up an application submission and you kind of tell a story, and you say, "This is the owner's experience. This is the vessels he's owned in his, in his lifetime. These are the... This is his claims history." Hopefully there isn't one, but, you know, chances are there might be if he's owned boats for a long time. How is the boat maintained? Is a current survey done on it, and is it showing that the boat is in good or above good condition, above average, way above average?

Do they have regular maintenance and repairs done to the boat, and is there a log of that? Is there a yacht manager that's overseeing all of that, the hiring of the crew, the management of the boat, the compliance documentation for the boat? So the better you can create a positive story, a clean risk to show an underwriter, the more likely they are gonna be to offer terms. And then you'll have those carriers offer terms that have the best product available.

Tyler (12:46):

Katie, a lot of times on our side, on the risk management, on the property and casualty side, we really tout the need for risk management; we tout the need for loss control, right?

Obviously, yachting is no different, right? The risk management, the loss control component is a very important part of this equation, right? Presenting the right risk with the right clients. What role does the captain and crew play in reducing risk?

Katie (13:12):

Oh huge! I would say they're the front line. I mean, they have to be in compliance with, you know, safety. The boat has to be in compliance with safety. They have to be constantly recertified, the captain and crew, their licenses and their certifications have to be always kept up. So, they're the ones that need to learn anything new that's coming out.

Like, the big buzz lately is lithium ion batteries. You know? So that wasn't a thing several years ago, and now it's a thing on every boat. There's at least some form of that. They have to be trained so that they know how to store them while they're being charged, what to do with them, that they're in a temperature-controlled space, what to do if there's a fire on the boat, how to mitigate that type of fire.

It's not just like a regular fire where you're gonna throw some water on it. They have to understand how to do that. And like I said, the crew is the front line, and the captain making sure that all people on board, including the owner, his family, guests, everybody on board is safe. That is their job, to make sure everybody is safe and to make sure that the operations of the boat run safely.

Julie (14:19):

So, basically what you're saying is awareness and preparation is key for it all.

Katie (14:23):

Yes, absolutely.

Julie (14:24):

It's got to start with that.

Katie (14:25):

Absolutely.

Tyler (14:26):

So you, you mentioned the yacht manager, right? And making sure, 'cause there's, it's so complex dealing with these yachts. Would you mind just talking about the relationship between the yacht owner and the yacht manager and also the captain of the yacht, and how important it is that all those things are synced up?

Katie (14:43):

So, I would say that is a definite relationship that needs to be cohesive. The captain is going be the operations. You know, he's gonna be the one that knows everything that's going on the boat, how everything runs on the boat, the needs of the boat. Your owner is going to rely on him for those duties, but then is gonna rely on the yacht management company for probably sometimes paying the crew, so payroll, making sure that all the documentation is in place and kept current for the vessel.

They're going to usually negotiate with shipyards for the annual maintenance periods or any kind
of refit work, and maybe even have somebody from the yacht management team oversee the project. So, they're heavily involved with the insurance. Yacht management companies sometimes are more involved with the insurance than the captain and/or they work together.

The owner hires the various parties so that he doesn't have to do all of that. That's not, you know, he wants to enjoy his vessel and make sure that everything is taken care of and that this operation is moving very smoothly. So when you surround yourself with a good yacht management team, which includes the captain, it works very well together.

They're very involved with, you know, where the boat's going to go, changes in itinerary. So, I think it's key relationships there and surrounding yourself with people that are trusted advisors again, and a yacht management company and captain are key to that.

Julie (16:13):

Well, I know we could actually probably keep going on this 'cause we might have to have an episode 2.0. Okay. But I do know that you are a wealth of knowledge for us to tap into, so we so appreciate you. Thank you ... being here with us. But to our viewers and everyone else, thank you so much for joining us, and as always, stay safe and stay protected.

Tyler (16:37):

Thank you, everyone.

Katie (16:38):

Thank you.

00:47 — Yacht ownership begins long before the purchase
From selecting experienced advisors and understanding operational responsibilities to planning complex voyages and managing long-term costs, successful ownership begins with building the right team and strategy.

05:15 — The risks yacht owners encounter most often

A common misconception is that the greatest yacht exposures involve fires, storms, or sinkings. In reality, the most common risks often arise from everyday operations.

07:19 — Why the right advisory team matters
Successful yacht ownership often depends on collaboration among specialists, including insurance advisors, captains, legal professionals, and management experts to help owners navigate purchasing decisions, operations, and ongoing management.

08:38 — Chartering introduces new considerations
While chartering can provide financial benefits, it also introduces additional operational and liability considerations that should be addressed as part of an overall risk management strategy.

10:04 — Not all yacht insurance policies are created equal
Every yacht owner's needs are different, and insurance solutions should reflect those differences. Working with professionals who specialize in yacht risks can help ensure owners build a program that reflects the unique needs of their yacht and lifestyle.