Considerations for Managing your Yacht

| 7 Sep 2012 | 0 Comments

With the costs of managing a yacht being exceptionally high, combined with increasing oil and fuel costs globally, it is imperative that yacht owners carefully consider the implications of purchasing and maintaining a vessel. Shipping registries across the globe provide vessel owners the opportunity to register and maintain their yacht under a low cost, tax friendly and economically stable flag state; thus enabling yacht owners to reduce their overall costs. The registry selected is therefore one of the most important considerations as regards to the long-term financial obligations of the yacht owner.

Managing your Yacht

Yacht ownership can be costly therefore it is important to consider the implications carefully

Untouched by the global economic slowdown, the yachting industry has continued to boom with yacht purchases and registrations worldwide. In light of the surrounding financial crises however, it has become prudent to be aware of wealth management strategies for maintaining a vessel.

Yacht owners from across the globe are taking measures to effectively register and manage their vessel in the most favorable location to avoid legal complications, stringent maritime regulations and costly registrations when cruising international waters.

A number of individuals choose to purchase their private yacht through marine finance. Monthly repayments can be significantly high, thus when creating an effective wealth management plan for your yacht, it is vital that you factor in the costs and interest payments involved if marine finance applies.

The following is a brief outline of considerations that yacht owners must make in order to manage their yacht successfully:

Registering in the most Favorable Location

The first step in registering your yacht is to determine the most suitable flag to register under. There are a number of factors to consider, from the high security and privacy of Panama, to the expedient registration of the Marshall Islands. Individuals must conduct thorough research on the registration costs, annual fees, license requirements, privacy levels and regulations of their preferred locations prior to deciding on one particular shipping registry.

A number of certificates and documents must be filed with the selected shipping registry. These include the following:

  • Bill of Sale or Builder’s Certificate
  • Suitability of Intended Use Certificate of Survey
  • Cancellation Certificate as evidence of renouncing previous registration

The selection of your chosen flag state should reflect your financial objectives and yachting intentions. It is highly advisable to seek the assistance of professional consultants to successfully register your yacht in a professional and timely manner.

Survey of the Vessel

To ensure the vessel is maintained to industry standards and thus will not lose its value, vessel checks and surveys should be carried out regularly. This entails the proper inspection of the vessel by a qualified marine surveyor to ensure that it is fit to sail in international waters. During this stage, the yacht will be assessed with regards to safety of its structure, machinery installed as well as the condition of the vessel.

The primary goal of a marine surveyor is to make sure that the yacht meets the regulatory standards as outlined by the selected shipping registry. Once this process has been completed, a certificate will be issued to the yacht owner which they can present to the registry to complete the registration process.

Marine surveyors are professionals in the shipping industry who work independently with private organizations and are hired to inspect vessels. It is imperative to hire a qualified and accredited surveyor to ensure that they evaluate your private yacht and inform you of the standards that need to be met.

Maintaining the Yacht

Owning a private yacht is considered to be a substantial financial commitment, not only with regards to the actual purchase of the boat, but also its maintenance costs. A yacht that is not maintained will be prone to depreciation in value as well as low performance as the machinery and equipment can suffer from a number of hazards at sea. There are certain checks and inspections that should be performed periodically, including the electrics, exhaust, plumbing, and drive train.

The most essential part of the vessel is the engine; therefore it requires the attention of a knowledgeable expert. Frequent checks should be made for oil level, water level and heat exchanger cap condition. It is imperative that yacht owners perform these checks before cruising waters, as a faulty engine can cause irreparable and costly damages.

Hiring industry experts is an important part of managing your yacht sensibly. If you do not invest in obtaining credible assistance from experts and opt for a cheaper service, it is likely to cost more in the long run.  The experience and knowledge of yacht experts will ensure that your yacht is maintained and repaired to the highest safety standards, which in turn will result in the smooth operation of your vessel.

Fuel and Travelling

fuelling a yacht

Fuelling is often considered to be one of the most costly aspects of owning a private yacht

Irrespective of whether you own or charter a yacht, the fuel costs must be taken into consideration as they can put considerable financial strain on yacht operators. It should also be noted that the costs of fuel tend to fluctuate according to international markets.

The cost of fuelling a yacht is largely dependent on the size of the yacht, the distance travelled, and the location of the fueling station. For example, a full fuel tank for some mega yachts can cost up to $1 million – which is a staggering financial burden on yacht owners and charterers.

It is estimated that Russian billionaire Roman Abramovich’s £1 billion yacht Eclipse requires £400,000 to fill up its tank. The scale and extent of fuel consumption is one of the most vital implications that must be considered carefully when deciding on voyage routes and financial budgets.

Insuring your Investment

All vessels that set sail must obtain marine insurance. This ensures that the yacht is protected against physical damage, theft, liability and various inevitable risks at sea. Individuals must obtain the most suitable marine insurance policy that directly correlates with their yachting activities to ensure they are covered against risks including loss, damage and wreckage.

Yacht insurance generally covers vessels over 27 feet in length, with the most commonly sought insurance policies being Hull coverage and Protection and Indemnity (P&I). The Hull coverage usually insures the vessel against damages such as machinery, fire and natural disasters (earthquakes, volcanic eruptions), whilst Protection and Indemnity ensures the yacht is protected in the event of collisions and wreckage.

Yachting activities are largely dependent on the natural environment which often proves to be unpredictable, therefore it is imperative to take out an appropriate insurance policy that incorporates a range of yachting activities. Obtaining insurance, either full coverage or third party liability, is one of the legal obligations of owning a yacht. In the event that a yacht is not insured, the owner becomes financially liable for the damage of their vessel, and any other vessels or marine entities that have been damaged by their yacht.

For the successful wealth management of your vessel, it is advisable to be financially prudent and obtain full coverage insurance, as it will effectively reduce the chances of costly payouts in the long term. Professionals in the marine and shipping industry can offer valuable advice and guidance with regards to accessing and implementing a suitable insurance police to match the yacht owner’s specific needs.

Careful Management and Consideration for a Long-Term Investment…

The cost of purchasing a private yacht is relatively high, therefore it is important to manage the vessel carefully to help sustain the boat’s value. Registering the yacht in a flag state that observes the highest standards and regulations, combined with low cost procedures and tax friendly regimes, is one of the principle elements to achieve effective wealth management over your vessel. Furthermore, by investing in the appropriate insurance and yacht management solution, individuals are able to keep their yacht in top condition, thus guaranteeing a long-term, profitable investment.

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Category: Wealth Management

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