11/16/2023

Current Challenges in Market for 2023/2024

By: Denise Hanna, CPYB, YBAA Board Member

Current Challenges in Market for 2023/2024

We are just coming out of the fall boat show season. Atlantic-Cruising yachts had a company meeting to discuss the two main challenges facing our team this year. Many of us are aware of the rising interest rates and difficulty for clients to secure insurance for their boats. We had an insurance underwriter and a finance expert share some of their knowledge to help us educate our buyers so they can qualify and close on their new or used boats.

Insurance:

• Clients do not realize that there are about 20 carriers worldwide so if they reach out to many agents, they are all talking to the same underwriters
  
  
• The rate for insurance used to be about 1% of value of the boat and now is about 3%
•  Many carriers are excluding hurricane coverage
•  Boats need to be north of Carolina or south of Grenada to be covered. Hurricane deductibles
  have risen, and lightning strike deductibles are 5%
• Insurance companies are requiring a solid resume with years of experience, including charter,
  personal use, ASA courses, safety courses and ownership of previous boats
• If clients are moving up 8-10’ in size, not a problem but if they are moving up 12-15’ or more, they may be denied
• Certain companies, such as Chubb are requiring 3 years previous ownership to qualify
• Clients who are buying for first time cannot get coverage to go further than Bahamas from East
  Coast at least for the first year
• Cargo insurance may be a separate policy until the boat comes from Europe to the USA

Many of you know this information but we need to be an expert and consult with clients about their
goals and how to achieve them. Taking the right courses, hire a captain for a period of time and help
them prepare their resume to present to the insurance underwriters so they are not denied coverage. It
should be one of the first conversations you have with your clients so they don’t get to the acceptance of
yacht stage or closing on a new boat and find out they cannot sail where they had planned.

Financing:

• We have been lucky to have interest rates as low as they have been for many years
• The Fed did not raise interest rates again this month, so they seem to have stabilized
• Our lender for new boats can offer rates of 8.25% but some are as high as 9.5%
• Remind your clients that interest is tax deductible for their boats
• It is best if they choose one lender who works with many banks and can help prepare a package
  that they know certain banks will approve
• Many clients plan to buy a boat and live aboard but no banks will approve full time live aboard
• If they plan on retiring, they should get their pre-approval ahead of time when debt to income
  ratio is higher
• If they plan on selling their house to move onto a boat, advise them to rent instead so they have
  cost covered but still have a permanent address
• If clients are planning to sail in the Med, there are new restrictions for areas of war coverage,
  and they may need to add war risk insurance or stay only in the Western Med
  Some lenders will only allow 7-8 months in the Med and then require boat come back to USA

We should be asking questions when we first meet our clients to find out their time frame and help them
achieve their goals since they hear many stories on social media and from friends and they assume they
will be able to retire, sell the house, buy and boat and sail away when in reality, they need to reverse
those steps and plan ahead so they can get their loan and insurance when the time is right.

Many years ago, I spoke at a Pentagon Sailing Club meeting in Northern Virginia. There were about a
dozen of the 50 or so members at the meeting who were retiring from the military soon and planned to
sell the house and sail away. Once I explained the best steps to achieve their goals, they changed plans
and ordered their boat while still working and owning their home. Once they closed on the boat, they
retired and sailed away with their loan in place while renting their home or maybe sold it a year or so
after starting their journey and paid off their loan and used rest of funds for cruising. I keep in touch
with many of them to this day and they are so thankful for the knowledge I shared so they could achieve
their dreams.

Denise Hanna, CPYB, YBAA Board Member