CHICAGO – The National Marine Bankers Association is advising members to have legal counsel review contract details as major boat insurance underwriters raise their deductible amounts for policyholders in response to losses from last summer's hurricanes, the NMBA said in a release Friday.
Marine lenders are being alerted that they will also need to adjust the deductible amounts in their boat loan contracts and warning that in cases where action is necessary but not taken, the boat loans go into technical default.
"This is a significant issue for lenders doing business in all of the states that were affected by the recent hurricanes," said NMBA President Don Parkhurst of SunTrust Bank.
Two major insurance underwriters have said that on new and renewal marine insurance policies, storm deductibles will increase from the common 2 percent to as high as 5 percent beginning Jan. 1. NMBA said other insurers are expected to follow.
"Many banks have a 2 percent insurance deductible maximum in their notes,” Parkhurst said. “So, banks will need to begin the process at once to update this provision and service companies will need to reprogram details of their documentation preparation systems."
Parkhurst said he expects the legal departments of banks to recommend notifying existing customers of the change.
"All of the companies that write business in Florida have or are reviewing their rates and deductibles after the worst boat insurance disaster in history,” said NMBA Director Mike Smith of Global Marine Insurance. “The good news to date is that only one underwriter, Allstate, has pulled out, but is considering opening back up next year. Right now, it appears the industry survived the worst without losing much capacity. However, all Florida companies buy catastrophic insurance at Lloyds with contract negotiations going on now. If the reinsurers change the rules, that could impact insurance availability."
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