Mechanisms currently exist that allow the global insurance industry to write coverage for very large and complex risks.

Risk transfer is a great way for insureds to protect themselves from loss, particularly those with potentially catastrophic impacts.

A risk like the Notre-Dame de Paris Cathedral would be complex to insure, but it can be done. Doing so would require the participation of many insurance companies.

By using [facultative] reinsurance, insurance companies can spread the risk amongst each other. It would allow them to keep their exposure to loss at an acceptable level. It also lets insurance companies come together to support the risk for 100% of the values insured.

Two important types of property affected by the Notre-Dame fire were – (1) the building itself and (2) fine arts. An insurance program can be developed to cover both.

Fine Arts Insurance

Fine Arts Insurance is available to cover individual works of art. Policies can be written to cover single paintings with values in excess of one hundred million dollars.

Coverage is also available for fine art collections and museums.

Due to their similarities, the manner how museums are insured can serve as a great example of how a cathedral like Notre-Dame can be covered.

Property Insurance

Property insurance is readily available to cover very large and complex risks such as infrastructure projects, industrial complexes and skyscrapers. Insuring the Notre-Dame Cathedral would involve much of the same mechanisms used to insure other large property risks.

The Reinsurance Program

If the building and its contents were valued at USD 10 Billion, an insurance policy could be written to cover its value in full. Behind the scenes, a facultative reinsurance program would be structured to spread the risk of loss amongst multiple insurance companies. This allows insurance companies to participate in the risk while maintaining their exposure to loss at acceptable levels.

There are different ways in which a facultative reinsurance program may be structured to write the referenced risk. Hereunder, we use facultative excess of loss reinsurance, which allows the risk to be split up in layers, as an example of how the property may be covered.

Facultative Excess of Loss Reinsurance

• Insurance Company Retention: USD 50 million.
• Reinsurance Layer 1: USD 250 million in excess of USD 50 million (retention).
• Reinsurance Layer 2: USD 700 million in excess of USD 300 million (retention + (layer 1)).
• Reinsurance Layer 3: USD 2 billion in excess of USD 1 billion (retention + (layers 1 and 2)).
• Reinsurance Layer 4: USD 3 billion in excess of USD 3 billion (retention + (layers 1 to 3)).
• Reinsurance Layer 5: USD 4 billion in excess of USD 6 billion (retention + (layers 1 to 4)).
• Total reinsured amount: USD 9.95 billion in excess of USD 50 million.
• Total insured amount: USD 10 billion.

Multiple reinsurers will participate in each layer until the risk is insured for 100% of its value. This allows the impact of a loss, as large as the fire of April 15, 2019, to be absorbed by the insurance industry. Not all insurers may survive the loss, but a mechanism is available to provide coverage.

There are alternative ways to insure the building, such as covering it on a first loss basis. This considers the probable maximum loss (PML), and other metrics, and sets a coverage limit in line with the PML estimate. That discussion is beyond the scope of this blog post. The point is brought up only to show that insurance is available and there are also various ways to structure a reinsurance program to cover the property.

The Notre-Dame fire is an example of a low frequency, high severity loss which the insurance industry is well equipped to handle. Insurance is available for such risks, provided that the insured is willing to pay the corresponding annual premium. Otherwise; the insured can choose to retain the risk and absorb all the losses that occur.

While I have not worked on a risk of the magnitude described above in the past, I am familiar with the concepts of structuring an insurance program for large risks. The same concepts I have used to write complex accounts in the past could be used to insure larger, more complex risks.

Risk Reinsurance Holdings, Inc. is a (re)insurance brokerage company based in South Florida. We can help with complex reinsurance transactions. You may contact us for assistance with your coverage needs or visit our facultative reinsurance page for more information about the product.

Starting a professional services business is a great undertaking. You are leaving behind the safety of a steady paycheck for the uncertainty of producing your own income. It is not an easy journey, but it can be rewarding. No longer will you depend on the direction of someone else to determine your responsibilities. It is up to you to do what’s necessary to succeed.

When working on your own, you have to wear many hats. You are President and CEO, but you are also in charge of sales, marketing, administration, etc. You may have to perform, by yourself, all the tasks that need to be completed in your new venture.

With hard work, and some luck, you can make your business self-sustaining. It is an important goal to strive for early on. After that, you can focus on growth. The level of income you can attain is only limited by your entrepreneurial drive and the opportunities you can convert.

With opportunity comes risk. As a professional services provider, you help clients achieve specific objectives. You perform your work to the best of your abilities. However; should any problems arise, the burden of fixing them falls entirely on you.

Insurance is a great way to deal with risk. It allows you to exchange the uncertainty of loss for a fixed premium expense. An insurer will indemnify you for the covered losses that you suffer, as per the terms of the policy, and help you recover.

Liability insurance is crucial for the protection of your business. It covers your risk of being sued for damages that you are held legally responsible for causing to third parties. Even when you are not at fault, having to defend yourself from a lawsuit is a burden that could have catastrophic impacts on your bottom line. Liability insurance can cover your defense costs, protecting your capital from having to be spent in attorney’s fees.

General liability and professional liability are two important insurance coverages that professional services companies need.

General Liability Insurance

General liability insurance provides coverage for third party bodily injury and property damage claims from the business’ premises or operations. While these are not major exposures that come to mind in professional services, being properly insured is still important.

Accidents are bound to happen. A client visiting your office may trip and injure himself. You can be held legally responsible. If you are not insured, you may have to pay for the awarded damages out of your own pocket.

The coverage provided by the general liability policy is broad. However; it leaves professional services firms exposed to losses that do not result in bodily injury or property damage. That is why the second type of policy is just as important.

Professional Liability Insurance

Professional liability insurance indemnifies you for the amounts that you are held legally responsible to pay to third parties as a result of wrongful acts. In the policy, wrongful acts may be defined as an act, error or omission in the professional services rendered or that should have been rendered by you. These are major exposures for professional services firms, they are only covered under professional liability insurance.

If the work you perform results in a financial loss to your client, due to an alleged mistake on your part, you may be held legally liable for damages. The professional liability policy will respond to defend you in a lawsuit and to pay for the damages awarded to the affected party.

As a business owner, you are responsible for knowing the exposures that your new venture faces. You have to set a plan to address them. Otherwise, an unexpected loss can derail your project and prevent you from reaching your objectives. It can actually lead to the failure of your business.

Working with an insurance broker is important. They are professionals in the area of risk transfer and management. They can help you understand your risks and develop an insurance program that provides comprehensive protection for your business.

With all the resources available, an accident should not be a reason for business failure. With proper planning, and the right instruments in place, you can navigate the hardships that a loss can bring and recover. You can feel secure knowing that there is support you can count on to get back to your regular business operations.

Risk Reinsurance Holdings, Inc. is an insurance brokerage company based in South Florida. We can help protect your professional services business against loss. You may call us for assistance with your small business insurance coverage needs. You may also visit the link below to submit an inquiry.

The Venezuelan Crisis

My native country of Venezuela finds itself in the midst of unprecedented political upheaval. Years of corruption and mismanagement have led to one of the most extreme examples of economic collapse. There have been shortages of all types of products, from staple goods to medicine.

For the past decade, people have seen their standard of living rapidly decline. Limited economic opportunities have also allowed crime to flourish with impunity. Life has become a daily struggle for survival. Individuals have had to endure the protracted collapse of society in a country of thirty million people.

The government and its opposition have juggled articles of the Venezuelan constitution, to their favor, in attempts to control the nation. The government has distorted it in a way that has allowed them to remain in power for two decades. The opposition, on their part, have set in motion a plan to remove the current government and call for new elections. Each party has their own interpretation of the facts and what the constitution allows. Both are ready to do what they deem necessary to enforce their will.

On January 23, 2019, the people of Venezuela took to the streets, in mass protests, to show their disdain of the current government and to demand a transition of power. The end of the day saw the country with two presidents, Nicolas Maduro who remained in office and Juan Guaidó who became interim president of Venezuela. Each stating that the other’s claim to power is illegitimate.

The Venezuelan people have made their demands known. They want change. The consequences of their protest are now taking shape. The country may now be at an inflection point. Many consider that the first step that must be taken towards recovery is to change the government. By some accounts, this is now inevitable. The hope is that the transition can be accomplished peacefully.

Regardless of what happens; there remains a long road ahead for all Venezuelans as the country looks to end its current economic and political struggles and recover.

Political Violence Insurance

Venezuela is entering a delicate period. The stage is set for two opposing political parties to fight for control of the country. Any slight miscalculation can tip the scales to violence. It is an outcome that neither party claims to want, but which may well be outside their control. To paraphrase Clausewitz, violence is the continuation of politics by other means. Therefore; if the situation escalates, Venezuela would not be the first example nor will it be the last.

The Middle East and Latin America have been hotspots of war and political violence. In Egypt, there were violent protests in 2012-2013. Syria descended to civil war in 2011. Colombia has been battling guerrilla groups for fifty years. Such are examples of political violence in the developing world. However; no region is immune. The United States and Europe have also seen their share of attacks. In all, terrorism and political violence have been the cause of untold death and destruction.

Insurance is available to protect businesses against political violence risks. Businesses have to weight their exposure to loss, against the cost of insurance protection. Political violence insurance can be purchased to cover: acts of terrorism, sabotage, riots, civil commotion, strikes, malicious damage, insurrection, revolution, rebellion, mutiny, coup d’état, civil war and war. The selected coverages can complement other insurance policies, address coverage gaps and ensure comprehensive protection for businesses.

The analysis of political violence perils, and your exposure to loss, should be impartial. The destruction that war, terrorism and political violence leave in their wake is value-neutral, meaning it is neither moral or immoral, nor good or bad; it is just destruction. An act of terrorism may be carried out by terrorists or by freedom fighters. A war may be unleashed to conquer others or to liberate them. How such events are interpreted may just depend on an individual’s point of view. Nevertheless; said events can be devastating to the individuals and businesses that suffer them, regardless of cause.

My hope is that calm will prevail as Venezuela looks to transition to a new government. Political violence events are unpredictable, their destruction can be absolute. You may not have control of whether you are a victim of a political violence event, but you can set instruments in place that will respond after a loss, to help you recover.

Risk Reinsurance Holdings, Inc. can assist with your terrorism and political violence insurance needs. We can help (re)insurance brokers worldwide arrange coverage for their international clients. We are also licensed as general and surplus lines brokers in the state of Florida, United States.

Learn about Risk Reinsurance Holdings’ capabilities as terrorism and political violence insurance brokers.

Many individuals dream of starting their own business and becoming successful entrepreneurs. They cite many reasons for why they want to start a business. It may be to achieve financial independence, gain control over their own time and schedule, leave a corporate job behind, bring about change to the world, etc. Whatever the reason, the start-up process can be complex, filled with risks and rewards. Becoming an entrepreneur is a process that requires a detailed assessment of your abilities in the face of the opportunities, challenges and risks that lie ahead in your entrepreneurial journey.

If you decide to start a business, it is important to assess the level of risk involved. When starting a new business you have limited resources to meet the business’ needs. Depending on the type of business, the cost of starting up can be substantial and your cash reserves can dry up faster than expected. Said start-up costs are frequently underestimated. Furthermore; it is not unusual for additional expenses to arise that were not previously contemplated. Your business capital must be employed to cover many different needs. Such needs may include: registration and licensing fees, leasing business premises, the ongoing cost of operations, insurance premiums, hiring professional service consultants, utilities, taxes, etc. each of which may be essential to your business operations.

When considering the vital areas that require investment when starting your business, you should not forgo purchasing a business insurance policy. An insurance policy is necessary to protect your business and to increase its odds of success in the long run. Business insurance provides the protections necessary to indemnify (compensate) your business for the covered losses it suffers, to defend it against lawsuits and to pay for judgments awarded to third parties for which your company may be held liable. You may have little or no control over the losses that affect your business. However; by being properly insured you are transferring the risk and uncertainty of loss to an insurance company in exchange for a fixed premium amount.

Purchasing insurance coverage as a start-up company does not have to be a complicated process. By using the financial projections you set for your business during the planning stages, you can provide an insurer with a basis from which they can analyze and estimate your business’ potential exposure to loss. From said analysis, the insurer can establish an insurance premium commensurate with the level of risk that your business represents. The method of calculating the insurance premium is beyond the scope of this article. However; finding an appropriate insurance rate/premium depends on many factors such as your past experience in related fields, historical loss data on similar businesses, market trends and conditions, the underwriter’s intuition, etc.

In its present state, the insurance marketplace is very competitive. Business insurance coverage is readily available from multiple insurance companies. The intense competition has led to downward pressures on insurance rates meaning that you, the business owner, can enjoy greater coverage at lower premium. While insurance market conditions can change, many of the catastrophic losses of recent years (such as the hurricanes and wildfires of 2017) have failed to reverse the trend on insurance prices in a significant manner. Competition remains intense and insurance companies continue to search for new ways to win your business and write your insurance policy.

You should work with an insurance broker whenever you are searching for business insurance solutions to protect your company, particularly when you are starting out. Similar to bankers, lawyers or accountants, insurance brokers provide important and specialized professional services to your business. Insurance brokers can help you navigate the insurance marketplace and ensure that your business finds the right insurance solution to fit its coverage needs.

Setting the right insurance program in place at the beginning of your business venture can go a long way towards ensuring that your business is adequately covered as it grows. An insurance broker can help structure the initial insurance program on your behalf and they can assist with its management. In so doing, an insurance broker can ensure that your business remains properly covered as its insurance needs change over time.

The cost of the services insurance brokers provide when sourcing insurance coverage on your behalf are part of the premium quoted by insurance companies for all the policies they write. Insurance brokers are compensated based on commissions. That means that insurance brokers earn a percentage of the policy premium under the written insurance contract. As such; you are able to use the services of an insurance broker without incurring additional costs beyond the insurance premium quoted under the policy. It is recommended that you use the services provided by insurance brokers since their knowledge of the insurance marketplace and expert advice can lead to important premium savings, coverage enhancements or to the avoidance or the resolutions of coverage disputes.

Risk Reinsurance Holdings, Inc. can help you find the right insurance solutions to protect your small business or start-up venture from loss. We are an independent insurance agency which allows us to work with various insurance companies to find coverage solutions on your behalf. We can compare coverage alternatives and select the most appropriate option to solve your insurance coverage needs.

As insurance professionals we can design the right insurance program on your behalf to protect your business against loss. We can help bring you peace of mind in knowing that if a loss occurs, the right insurance protections are in place to indemnify your business and help it recover.

Try Risk Reinsurance Holdings today and leverage our expertise and market access to solve your insurance needs. You may follow the link hereunder to complete a questionnaire and get the business insurance quoting process underway.

Travel insurance is an essential item to purchase for any trip, especially when traveling abroad. The places you visit may fall outside the geographic scope of your health insurance policy. While some health insurance plans may offer coverage worldwide, you should review your plan carefully to determine the extent of your coverage while traveling. If covered, some health insurance plans may provide reimbursement for medical expenses, leaving you with the responsibility of having to pay the initial cost of treatment on your own.

Travel insurance is an excellent way to address the risks you face while traveling. Said policies offer protections beyond coverage for medical expenses incurred from bodily injuries or sickness. Travel insurance can indemnify (compensate) you for losses such as: (1) unrecoverable deposits and expenses if your trip is canceled for covered reasons, (2) additional expenses incurred due to trip interruptions, (3) additional expenses incurred due to lost or delayed baggage, (4) medical expenses, (5) medical evacuation/repatriation, etc.

Travel insurance is tailored to address risk while traveling. It is a cost effective way to reduce your exposure to loss. With travel insurance you are transferring your risk of loss to an insurance company. You are exchanging the uncertainty of loss with the insurance company’s commitment to indemnify you for the covered losses you suffer and a fixed premium amount payable to the travel insurance company.

Travel insurance is readily available for purchase online, making the product readily accessible to cover your next trip. We (Risk Reinsurance Holdings, Inc.) are currently offering travel insurance products from Seven Corners, Inc. to address your travel insurance needs. Their roundtrip elite insurance plan provides travel insurance coverage for individual trips up to a maximum of 90 days. It covers insured individuals for the following:

Travel arrangement protection

• Trip Cancellation: Covers your non-refundable, prepaid trip cost if you are unable to take your trip due to a covered reason. Limited to 100% of trip costs up to USD 30,000.00 per trip.
• Trip Interruption: Covers the non-refundable, unused portion of your prepaid trip cost and the additional cost to return home or rejoin your trip due to a covered reason. Limited to 150% of trip costs.
• Trip Delays: Pays for additional transportation, meals, accommodations, and non-refundable, unused prepaid expenses if you are delayed en route to/from your trip. Limited to $1,500 per trip (for delays of 6 or more hours; total payment is subject to a daily limit).
• Change Fees: Covers fees associated with a change to your air itinerary. Limited to USD 75.00 per trip.

Travel Medical Protection

• Emergency Accident & Sickness Medical Expense: Covers medical treatment for a sickness or injury which occurs during your trip. Limited to USD 250,000.00 per trip.
• Emergency Dental Expense: Covers dental expenses up to $750 for an injury.
• Emergency Medical Evacuation/Repatriation: 1)Transports you to the nearest appropriate medical facility if medically necessary; 2) Returns your remains to your residence if you die while traveling; 3) If you are hospitalized more than 7 days, a) transports dependent children home if they are traveling with you and b) Sends a person chosen by you to/from your bedside if you are traveling alone. Limited to USD 1,000,000.00 per trip.

Travel Baggage & Personal Belongings Protection

• Lost, stolen or damage baggage: Covers loss, theft, or damage to your baggage and personal effects. Limited to USD 2,500.00 per trip.
• Baggage delay: Covers checked bags if they are delayed on the way TO destinations, not returning flights. Limited to USD 600.00 per trip (secondary to other coverage).

Additional Coverages and Travel Services

• Accidental Death & Dismemberment: Pays benefits for death, loss of limbs, or loss of sight due to an accident occurring on your trip. Limited to USD 25,000.00 per trip.
• 24/7 Travel Assistance Services: Seven Corners, Inc. Assist is with you every step of your trip! Our 24/7 multilingual team is available to help you with travel emergencies and general travel assistance. They can arrange medical evacuations, escorts for unaccompanied children, medical record transfers and second opinions, and help you locate medical care. They can also provide interpreter referrals, help with lost passport recovery, hotel and flight re-bookings, and many other services.

For additional information you may review the plan’s information here:
Seven Corners Roundtrip Elite Brochure (for U.S. residents).
Seven Corners Roundtrip International Brochure (for non-U.S. residents).

You may follow the links hereunder to get quotes under the Seven Corners Roundtrip travel insurance program.

When you purchase a marine insurance policy to protect a yacht or recreational vessel, there are conditions stipulated in the insurance contract that you need to read and adhere to while the policy is in force. Compliance with all the terms and conditions established in the policy is of paramount importance. Noncompliance can void your insurance contract after a loss occurs and leave you having to pay for all the resulting damages and expenses on your own.

In this article I highlight some of the most common policy conditions found in recreational marine insurance policies. Many of these conditions find their way into most insurance contracts, however they are by no means all the conditions that may be applicable. You have to read your insurance policy carefully to determine what conditions apply. Every insurance policy you purchase should be read when originally purchased and after each renewal. There may be changes that affect your coverage and your responsibilities. You need to be aware of all applicable terms and conditions under your insurance policy.

To start, the insurance policy establishes a policy period i.e. the coverage term of the insurance contract. The policy period runs from a set inception date to an expiry date (as agreed by the insurer and the insured). Said period is normally established as one year (12 calendar months). It may be amended if circumstances require. Such amendments are subject to the prior approval of the insurance company.

The policy term is important because it defines the time frame under which the insurance policy is in force. Any losses falling outside the policy period will not be covered because there is no insurance contract in place protecting the vessel. You should be aware of all coverage periods and make sure that the negotiation of the insurance renewal is successfully completed before the contract expires.

Insurance conditions related to vessel operation

The main set of conditions relate to the use of the Yacht and how the risk is described to the insurance company at the time of underwriting. When completing an insurance proposal form, questions such as the type of use and navigable waters of the vessel are asked so that the insurance underwriter can assess the risk and charge an adequate premium.

The premium amount payable is dependent on the information provided in the proposal form, therefore the information stipulated must be true and strictly adhered to. Any breach in the conditions relating to the type of use or area of navigation of the vessel will result in no coverage being provided while the vessel is non-compliant with the established conditions.

Private or recreational uses contain limitations that prohibit the use of the vessel for hire, reward or remuneration of any kind. If the uses defined in the policy are established as private or recreational, there will be no coverage for any voyage performed for hire without the prior agreement and approval of the insurance company. Any use (howsoever defined) falling outside the applicable definition of use in the contract will be excluded.

On occasion, a vessel may not be operating in any capacity for an extended period of time. If the vessel is not going to be put to use it can be defined as being laid up or put out of commission. If so, due to the reduction of risk to the insurance company while the vessel is not being operated, the insurer will provide coverage for the vessel at lower rates commensurate with the reduction in risk.

The general conditions section of the policy will contain information about the restrictions on the use of the vessel while laid up. Said restrictions will include warranties stipulating that the vessel will not be operated in any capacity or used as a residence.

The insurer must approve the lay up period of the vessel before agreeing to amend coverage terms. The start of the lay up term and the estimated duration must be advised to the insurer. If the vessel is to resume operations, then the insurance company must be notified and they have to give their approval before full coverage is restored.

Compliance with the conditions relating to the vessel’s status and operation are very important and can directly impact the settlement of losses following an accident.

Insurance conditions related to vessel seaworthiness

When agreeing to insure a vessel, the insurance company will want to ensure that the vessel is in good condition and that there is no undue exposure to risk. To determine the condition of the vessel the insurer will require survey reports on the vessel. A survey report entails the inspection of the vessel by a licensed professional where the condition of the vessel is determined.

Insurance companies will use survey reports in their analysis of the risk and will require that any recommendations established in the report be implemented. In effect, by using a survey report, the insurance company is requiring its insureds to maintain the vessel in the best condition possible according to the report.

Adherence to survey report recommendations is important and any breach may impact possible recoveries should a loss occur. However; there is an overarching requirement that the vessel must remain seaworthy for coverage to apply. If a vessel is determined to not be seaworthy, then coverage will be void and any claims that result from a loss will be denied.

Insurance conditions related to underwriting information

Parties to an insurance contract are obligated to act under the principle of “utmost good faith” when transacting insurance. The principle states that all relevant information which might influence a contract party’s perception of the risk, or the coverage provided by the policy, should be disclosed. Information asymmetry, which occurs when one party to a contract knows more about the subject matter of the contract than the other, is a problem when analyzing risks. An insurance company underwriter relies on the information provided by an applicant when reviewing the risk. Based on said information the underwriter will determine if the risk should be accepted and the premium that should be charged.

If left unchecked asymmetric information can lead to adverse selection. Adverse selection occurs when high risk insurance customers purchase insurance products at rates/premium that do not accurately reflect the level of risk they bring to the insurance company. To protect the insurance company and its customers, there are strict conditions in place that require that all material (relevant) information be disclosed.

Fraud, non-disclosure, misrepresentation or concealment of material information under an insurance contract will render the contract void and any resulting losses declined. Said actions represent a moral hazard on the part of the insured that is not insurable. Without such safeguards in place, insurance companies can find themselves with a portfolio of written business for which not enough premium was collected, which in turn could lead to insolvency.

The duty of disclosure is ongoing and is renewed at each policy renewal. Changes in material information should be disclosed to an insurance company immediately to avoid complications in the settlement of claim.

Insurance conditions related to contract cancellations

Insurance companies and insureds have the right to cancel insurance contracts, including those covering yachts and recreational vessels. Notice must be given to the opposite party of when the contract is to be canceled. Insureds can cancel coverage at any time, insurers must provide a notice period before cancellation can take place.

There are statutes in each state defining minimum notice periods for insurance company cancellations. Said periods may read 10 days for non-payment of premium and 30 days for any other reason (it can vary from state to state). Said periods allow insureds to remain covered while alternative insurance coverage can be sourced. There may also be statutes defining the acceptable reasons for which an insurance company can cancel an insurance contract.

The sale of, or a change in the insured’s interest in, a vessel will lead to the immediate termination of the insurance contract without notice. A new insurance contract must be negotiated for the new owner of the vessel or the change in interest.

When coverage is canceled, premiums paid or those that remain outstanding are adjusted according to the insurance company’s time on risk covering the subject matter of the insurance contract. For cancellations initiated by the insurance company, any unearned premium is returned at pro rata terms i.e. proportionate to the length of time from the date coverage actually terminated to the original expiry date. Cancellations initiated by insureds may take place at short rate terms i.e. not proportionally but rather as established in the insurance contract.

The objective when writing insurance policies is to see insurance contracts run their course from policy inception to expiry. However; in situations where coverage must be canceled, the steps to follow for cancellation to take place will be delineated in the policy.

Warranties and preservation of insurance company rights

The insurance contract will require you to comply with all established warranties and subjectivities. When analyzing a risk, an insurance company may require that certain conditions be met prior to offering coverage. Said requirements may take the form of vessel protective devices such as fire suppression equipment, GPS tracking, etc. Or may affect the vessel operation such as requiring the vessel to be operated by multiple crew members, setting captain experience requirements, etc. The goal of said warranties is to mitigate (reduce) the risk of loss. All warranties need to be met and complied with in order for coverage to remain effective. A breach of warranty can render the contract void should a loss occur.

Finally, you are responsible for preserving the rights of the insurance company at all times. Via subrogation, an insurance company acquires your rights of recovery against at fault third parties for claims payments made following a loss. Waiving an insurance company’s right of recovery can reduce your claim settlement by the amount that could have been otherwise recovered. Waiving said rights may result in a denial of a claim that may otherwise be covered.

Compliance with all terms and conditions in an insurance contract is extremely important. The above were some of the general conditions that are found under insurance contracts covering yachts and recreational vessels. It is not meant to be an all inclusive list of conditions. You should read your insurance policy carefully and follow the conditions described therein. I have not included the conditions describing your duties after a loss or accident occurs. Those will be discussed in a future article.

Risk Reinsurance Holdings, Inc. is an insurance brokerage firm located in Broward County, Florida. We can find insurance coverage on your behalf to address personal, business and specialty risks to protect you, your family or your business against loss. We offer insurance solutions to cover your boat and yacht (marine) exposures. Our recreational marine insurance products are tailored to address the insurance needs of individuals operating boats, yachts and other vessels for private and recreational uses.

We are an independent insurance agency, representing many insurance companies. This allows us to compare coverage alternatives on your behalf and select the most appropriate option to address your needs.

Try Risk Reinsurance Holdings today and leverage our expertise and market access to solve your marine insurance needs. You may follow the link hereunder to complete a questionnaire and get the quoting process underway.

The process of purchasing insurance to protect your family or business can be quite complex. There are many insurance companies each offering different insurance products. Choosing the right coverage solution from a strong insurer is an important decision, one that can have an impact on your ability to recover after a loss.

Insurance brokers are specialists navigating the insurance marketplace. They understand what insurance products are available to address your coverage needs. Similar to solving a jigsaw puzzle, an insurance broker will work with insurance companies to put together different coverages while structuring an insurance program to protect you or your business. Insurance brokers simplify the insurance purchasing process and they ensure that you have coverage options from which to choose from in search for the right coverage fit.

Insurance brokers help in the insurance purchasing process by: (1) analyzing your coverage needs, (2) approaching insurance companies capable of satisfying them, (3) negotiating with company underwriters to reach an adequate level of protection and a premium reflective of the level of risk transferred and finally (4) the insurance broker will arrange to bind coverage and assist with the ongoing management of the insurance contract.

Insurance brokers enjoy access to more coverage options than may be available to you as a potential insurance client. Many insurance companies deal exclusively with insurance brokers, therefore entire segments of the insurance marketplace may not be accessible to you should you choose to approach insurers directly. An insurer’s decision to work exclusively with insurance brokers depends on the level of complexity of the risks being covered. For straightforward, homogeneous risks such as personal automobile insurance, insurers may very well sell direct to consumers. However; as the complexity of the risk increases, the likelihood of an insurer preferring to work with an insurance broker also increases. In most situations, risks such as construction, commercial insurance, aviation, marine, etc. require the involvement of an insurance broker to assist with the negotiation of the insurance contract.

A great insurance broker will help you find the right insurance policies to protect you or your business from potential losses. They can compare your coverage needs to your current insurance protection to determine if there are any gaps in coverage. By structuring a comprehensive insurance program, the insurance broker can help ensure you are properly covered against loss, helping you or your company recover after a loss via indemnity payments from the insurer according to the terms established in the insurance policy.

Utilizing the services of an insurance broker comes at no additional cost to you. Insurance brokers earnings are based on commission. Said commissions are computed into the insurance premium quoted by insurance companies and constitutes part of their marketing expense. The premium quoted on the same risk, all things being equal, will be the same whether an insurance broker is used or not. Therefore; using an insurance broker is an advantage because you are using an industry professional to assist in your insurance negotiations without adding additional costs to your policy.

Risk Reinsurance Holdings, Inc. is an insurance brokerage firm based in South Florida. We help individuals and businesses find the insurance solutions they need to properly protect them against loss. Our goal is to help insurance customers find the insurance products that will best help them recover after a loss. We can help you solve your coverage needs and we aim to do so in an efficient manner. As insurance brokers we have years of experience in the industry assisting customers with all sorts of insurance transactions including personal, commercial/business and specialty insurance coverages.

We are an independent insurance broker, meaning that we work with many insurance companies to satisfy your coverage needs. This allows us to compare coverage options from different insurers on your behalf. We can help you select the most appropriate insurance protection.

Try Risk Reinsurance Holdings today and leverage our expertise and market access to solve your insurance coverage needs. You will find links to our practice areas hereunder, click to learn more.

The art world is full of mystery. Much goes on behind the scenes in a market where deep pockets are chasing a limited supply of works. New art is always being created and its value is highly subjective. It is impossible to know with certainty if an acquisition will withstand the test of time and become a priceless artifact. With works valued in the hundreds of millions of dollars, there is much to gain and lose when dealing with art.

It is difficult to grasp how a work of art painted on a canvass 1’6” x 2’2” could command a value of USD 450 million but that is the price paid at auction for a work titled “Salvator Mundi” painted on the year 1490 by Leonardo da Vinci. That is the current record for any art work sold at auction and it was achieved on November 15, 2017. That figure is fascinating, for that price governments can purchase fleets of aircraft or ships, they can launch satellites or construct buildings. However; it is difficult to see any of the above retaining any significant value ten years from their creation, much less half a millennium, which is how long “Salvator Mundi” has been in existence.

Once the art work is acquired its value will always be subject to change. Economic conditions, art market trends, changes to the supply of valuable art, etc. can make art values fluctuate. However; fire and many other perils that can damage the works can make priceless art worthless.

Insurance is available to cover all types of art and valuable property against all sorts of damage. There are departments within insurance companies dedicated to said line of business. Without the availability of art insurance, any person would be hard pressed to invest USD 450 million on a painting that can lose its value from any type of damage, be it from fire to something as simple as the work falling from the wall from which it hangs.

Fine arts, depending on the type of work, can generally be considered property that is easily transported. A painting may travel between museums worldwide as it is presented at different exhibitions. The mobility of the artwork makes it difficult to insure under the standard framework of property insurance. Coverage must be written in such a way that insurance will protect the work wherever it is located, be it inside any given building such as a museum, home, storage facility, etc. or in transit between locations.

The line of insurance business under which fine arts falls is known as inland marine insurance, a class of insurance used to cover mobile and/or specialized property. Coverage for valuable items, bridges, antennas, construction equipment, etc. falls under inland marine insurance. The type of policy used to insure fine arts is called a floater, a type of inland marine policy providing coverage that follows the insured item wherever it is located.

Insurance companies will require premium commensurate with the level of risk they are assuming when writing an art insurance policy. If the work will remain stored at a highly protected facility, fitted with the necessary features to ensure its preservation, the level of premium will be lower than that quoted for the same work if it will be exhibited at different museums and galleries throughout the world. Packing the work and transporting it represents one of the riskiest endeavors when dealing with art. The proper handling and packing of the art is vital so that the items do not get damaged, or stolen, in transit from their point of origin to their destination.

A painting such as “Salvator Mundi” will require premium levels in the hundreds of thousands of dollars, or more. Much will depend on the types of risk that the art will be subjected to. The high value of the work makes the high premium level inevitable. The total loss of the work, or even a reduction in its value (after being damaged and subsequently restored) would be a catastrophic event in the art insurance market.

Art and valuable items purchased by individuals, while not having the high values of record breaking works, are still important to individuals and they need to be protected against loss. A private collection of works can be a significant asset to a person. Works of art may serve as a source of income, be it from their exhibition or sale, or they may even act as collateral to secure loans.

An individual’s homeowner’s insurance policy will offer limited coverage for fine arts. Said policy will apply sub-limits to several classes of valuable property and restrict coverage while the property is away from the insured’s “residence premises” i.e. the location where the insure resides and is listed in the policy as covered.

Fine art insurance offered through an inland marine floater policy will offer the greatest protection for the works. It will also allow the insurer and insured greater flexibility to negotiate adequate terms and conditions before writing the art insurance policy, thus limiting any surprises that may arise in the event of a loss.

At Risk Reinsurance Holdings we are developing partnerships with insurance companies to enable us to help our clients protect their valuable property against the potential for loss or damage. If you would like to be kept up to date of our future offerings on fine arts insurance and other products, please join our newsletter hereunder.

If you, as an insurance professional, ever face the opportunity to deal with aviation insurance, you are far more likely to handle a multitude of general aviation risks before ever seeing the opportunity to quote an airline of any size. General aviation is the term used to define all types of civil aviation that fall outside scheduled or non-scheduled air transportation (types of commercial operations performed by airlines). General aviation includes any type of aircraft and use, whether for private or commercial, so long as it is not ‘scheduled’ or ‘non-scheduled’ air transportation as indicated above. Currently the number of aircraft in the world stands at approximately 300,000 of which 200,000 are in the United States. Of the total number of aircraft, the majority fall under the definition of general aviation. For example, in the United States, roughly three percent of all aircraft are used by air carriers, the rest are general aviation aircraft. Aircraft come with many different features but their overall design is quite similar due to the requirements to achieve controlled flight. Of all the aircraft in the market today, you are likely to come across the Cessna 172 Skyhawk; a four-seat, high wing, single engine aircraft manufactured by the Cessna Aircraft Company. Said aircraft has been the most produced civil aviation aircraft in history.

There are many Cessna 172s in the market today, ranging in value anywhere from under USD 50,000.00 to USD 300,000.00 – depending on the year of manufacture. Although not as expensive as other models, the value of the aircraft is significant enough to bring hardship to an aircraft owner should any damages befall it. The purchase of insurance needs to be considered and coverage should be arranged so that an aircraft owner can recover from any loss to allow his enjoyment of the aircraft to continue.

Hull Coverage

To protect the aircraft and the interests of an insured on the aircraft itself, on a first party basis, hull coverage must be arranged. Hull coverage is used to indemnify the insured for any loss or damage to the aircraft itself. Data such as the type of aircraft, the estimated total hours of operation, the experience of the pilot, etc. are all necessary to analyze the risk and determine an appropriate premium to charge. A Cessna 172 aircraft valued at USD 150,000.00 with a USD 5,000.00 deductible may receive a rate of 1.00% which will be applicable to the aircraft insured value. That means that the total premium charged would be USD 1,500.00 for hull coverage. The premium is calculated by multiplying the rate by the value of the aircraft. The rate is set by the insurance underwriter. Arriving at an appropriate rate is not an exact science. The underwriter will use historical loss data from similar aircraft, market conditions, risk appetite of the insurer and his own intuition to arrive at a rate within certain guidelines set by the insurance company.

Hull War Coverage

The policy wordings for hull coverage generally exclude perils that fall under the definition of “war and allied perils”. In said cases, the policy will exclude losses arising from war, nuclear reaction, strikes, civil commotion, intentional damages by others, etc. The mentioned perils may be written back (i.e. covered) by purchasing Hull War coverage. In our above example, the same Cessna 172 aircraft valued at USD 150,000.00 will have nil deductible and may receive a rate of 0.10% which will apply to the aircraft insured value. The result is an additional premium of USD 150.00 to write back the risks excluded under the hull wording. Risks dealing with nuclear reaction will normally remain excluded.

So far, the aircraft details look as follows:

Aircraft Make & Model: 1985 Cessna 172
Registration Number: Set by aviation authority, ‘N’ number in the U.S.A.
Aircraft Agreed Value: USD 150,000.00
Crew Seats : 1
Passenger Seats: 3

Liability Coverage

Determining the appropriate coverage limits for Hull and Hull War coverage is straightforward, the value of the aircraft is known at the time of underwriting or can be determined by use of market value guides of the stated aircraft make and model or an appraisal inspection done on the insured’s own aircraft. Liability on the other hand is more complicated. Liability insurance tends to fall in the category of ‘you should purchase as much coverage as you can afford’. By owning and operating an aircraft an individual owes a duty of care to third parties to operate the aircraft in a safe manner avoiding any accidents. The risk of an accident occurring will always be present. Aviation, as safe as it is, remains a potentially catastrophic activity. Any accident, no matter how minor or severe, can result in an aircraft owner being held liable for damages far above what he or she may be able to handle. Insurance becomes vitally important to ensure that funds are available to pay claims and that the claims handling process is carried out by professionals with relevant experience.

In the United States, there are no established minimum insurance requirements setting out the amount of liability coverage an aircraft owner must to purchase. However; the financial responsibility law states that an individual (or business) responsible for causing damages must be able to pay for the damages caused. The financial responsibility law basically sets unlimited liability on the part of the aircraft owner causing the accident up to the amount of damages caused. Other markets, such as the European Union, have established minimum insurance requirements which set a base for the minimum amounts of insurance coverage individuals must purchase to operate an aircraft. Nevertheless; if damages are greater than the coverage limits purchased, the insured will remain responsible for indemnifying all injured parties fully even after the policy’s coverage limits have been depleted.

In insuring the above referenced Cessna 172 aircraft in the United States an insured may purchase a USD 2,000,000.00 combined single limit liability policy. The insured may purchase greater or lower limits. There is no set minimum. When a combined single limit of USD 2,000,000.00 is purchased, the policy will pay out up to USD 2,000,000.00 for all damages that the insured is held legally liable to pay for third party legal liability and passenger legal liability combined. If the limit runs out, the insured will no longer have the backing of the insurer and will no longer be indemnified for any losses above the USD 2,000,000.00 limit. Split limits are also possible and they may read USD 1,500,000.00 for third party legal liability and USD 500,000.00 for passenger legal liability. For liability coverage, a specific premium amount is quoted. For the above example, a premium of USD 1,000.00 may be charged. If the coverage limits are split, then the same premium of USD 1,000.00 may be stated as follows: USD 600.00 plus USD 100.00 per passenger seat (four i.e. one crew and three passengers – if the pilot/crew fall under the definition of passengers in the policy wording). In practice, split limits are likely to result in lower premiums.

In Europe, and other jurisdictions where minimum coverage requirements are defined, the third-party liability limit is set according to the maximum takeoff weight of the aircraft and the per passenger legal liability limit is set by statute. The maximum takeoff weight of a Cessna 172 aircraft is 1,111 kg. At the maximum takeoff weight of a Cessna 172, the coverage requirement is SDR 3,000,000.00 which roughly equates to USD 4,500,000.00. The coverage requirement for passenger legal liability is SDR 250,000.00 per passenger seat which roughly equates to USD 350,000.00 per seat. The coverage limit that should be purchased to comply with the minimum insurance requirements in Europe is approximately USD 6,000,000.00 for a combined single limit or USD 4,500,000.00 for third party legal liability and USD 1,050,000.00 for passenger legal liability excluding the pilot (USD 1,400,000.00 including the pilot under the passenger definition). Premium for said coverage limits may approach USD 2,500.00.

Pilot Personal Accident Coverage

For pilots, several scenarios must be considered. First, if the pilot is the aircraft owner, then liability coverage will not be appropriate because the insured cannot sue himself. Liability coverage is meant to indemnify the insured for damages caused by the insured to third parties. If the pilot is an employee of the insured, then workers compensation coverage will be more appropriate since the aircraft insurance policy will contain exclusions removing coverage for liability assumed under workers compensation regulations.

In the above referenced situations, a personal accident policy may be purchased to cover the pilots of the aircraft (and/or the passengers as well). The difference between a liability policy and a personal accident policy is that liability policies provide indemnity to the insured, meaning that the policy intends to restore the insured to his/her previous condition without providing any benefit to the insured other than the recovery of the lost amount. A personal accident policy is a benefits policy in which the coverage limit of the policy becomes payable in full by insurers should the injury suffered fall within the pre-established criteria of the policy, partial payments may also be payable for lesser injuries as defined in the schedule of benefits. The payment is made to the injured party which may well be the insured. The personal accident policy is not concerned with the actual amount of loss. The policy is concerned with the type and extent of the injury suffered, if said injury qualifies for a payout and if so, the payout amount (as set out in the policy).

There is no set standard to deal with coverage for the pilots. When purchasing personal accident coverage, the insured may purchase the coverage limit they deem appropriate. In our example, we shall use a limit of USD 150,000.00 for the pilot. Said limit will cover solely the pilot whilst he is flying, boarding, alighting the aircraft or whilst airside. A rate will be set according to the level of exposure to loss presented by the risk. We shall use a rate of 0.35% of the personal accident coverage limit. Our personal accident premium therefore reads USD 525.00 for a single pilot seat.

To determine the total premium for insuring the above referenced Cessna 172 aircraft one must add all the premium for the individual coverages purchased. Since we used two examples, one insuring the aircraft in the United States where no minimum coverage limits are required and the other in the European Union which does set minimum coverage limits, we have two different totals.

Coverage Limits, deductibles and premium for a Cessna 172 aircraft insured in the United States:

Hull:

Agreed Value: USD 150,000.00 each aircraft.
Deductible: USD 5,000.00 applicable to all losses excluding any form of total loss.
Rate: 1.00% of aircraft agreed value, each aircraft.
Premium: USD 1,500.00

Hull War:

Agreed Value: USD 150,000.00 each aircraft.
Deductible: Nil.
Rate: 0.10% of aircraft agreed value, each aircraft.
Premium: USD 150.00

Liability:

Combined Single Limit: USD 2,000,000.00 any one person/aircraft/accident.
Premium: USD 1,000.00 each aircraft.

Personal Accidents:

Crew Personal Accident Limit: USD 150,000.00 each insured seat.
Crew Personal Accident Rate: 0.35% of personal accident limit each insured seat.
Premium: USD 525.00

Total premium: USD 3,175.00

Coverage Limits, deductibles and premium for a Cessna 172 aircraft insured in the European Union:

Hull:

Agreed Value: USD 150,000.00 each aircraft.
Deductible: USD 5,000.00 applicable to all losses excluding any form of total loss.
Rate: 1.00% of aircraft agreed value, each aircraft.
Premium: USD 1,500.00

Hull War:

Agreed Value: USD 150,000.00 each aircraft.
Deductible: Nil.
Rate: 0.10% of aircraft agreed value, each aircraft.
Premium: USD 150.00

Liability:

Combined Single Limit: USD 6,000,000.00 any one person/aircraft/accident.
Premium: USD 2,500.00 each aircraft.

Personal Accidents:

Crew Personal Accident Limit: USD 150,000.00 each insured seat.
Crew Personal Accident Rate: 0.35% of personal accident limit each insured seat.
Premium: USD 525.00

Total premium: USD 4,675.00

As can be seen above, the main difference lies in the liability coverage limits that must be purchased. The absence of minimum coverage requirements does not mean that the insured’s responsibility will be any less should they cause an accident, it only means that the aircraft does not have pre-established coverage limits to comply with. The aircraft may be operating without insurance.

Aviation and the use of aircraft has become a vital part of our livelihood, it has made the world a smaller place. Aircraft such as the Cessna 172 have made flight accessible to thousands of individuals. Aviation is very safe and it’s an activity that has captivated us and become entrenched in our society since the first powered flights performed by the Wright brothers in the year 1903. Although very safe, aviation is extremely unforgiving of pilot error. The potential for accidents (and the losses that arise therefrom) should be carefully considered. Insurance is available to transfer the risks of aviation exposures to insurers thus allowing some relief to an insured for his enjoyment of his aircraft which may well be a Cessna 172 or other model.

Please continue to read our blog to see further discussions on the topic of aviation insurance and more. The above is an introduction outlining some key points for insuring aircraft such as the Cessna 172. Future posts shall expand on the available coverages and what is required to successfully work in the field of aviation insurance and more.