Lexington, KY - Horses - even gift ones, and those without grand pedigrees - can be expensive to take care of and to replace. Their owners can minimize those risks and financial losses with the appropriate specialized insurance. Providers of equine insurance include local businesses Nicholson Insurance Agency and Ron Kirk Horse Insurance.
Joe Browne Nicholson opened his equine insurance business the Monday after Derby Day in 1973. Nicholson had previously worked as a bloodstock agent with his late father-in-law, horseman John A. Bell. Nicholson's company insures all breeds of horses and horses used for various purposes.
"The greatest majority we insure are Thoroughbreds," he said.
Ron Kirk, owner of Kirk Horse Insurance, has been in the business 29 years and carries only equine insurance.
"We primarily insure Thoroughbred racehorses, but a small portion of our business is with sport horse owners," Kirk said.
Types of equine insurance include full mortality, written to protect the life of the horse against accident, sickness or death. This type of policy is the most popular with both Nicholson's and Kirk's clients.
Horses are insured for full market value or less, if the owner chooses to economize. They can't be insured for more than their fair market value.
While the premium is the same percentage of each horse's value, its actual cost varies according to the value of the horse. Insuring a stallion like Dynaformer, who stands at Three Chimneys for a stud fee of $150,000, costs much more than does insuring a stallion with a fee of only $5,000.
Owners can save money by buying one policy for groups of similarly valued horses. No single horse in the group is covered for more than 20 percent of the policy's value.
Nicholson said that clients who plan to bid on horses at the major sales usually contact him ahead of time to arrange for "fall of the hammer" coverage. That insurance on the new owner's horse starts as soon as the auctioneer calls, "Sold."
Medical and/or surgical coverage is written only as a rider to the life insurance policy. A loss of use policy covers inability of a horse to perform as he could before an accident or illness.
Kirk said that premiums for major medical/surgery coverage "have increased a fair amount in the recent past (maybe as much as 25 percent), and the deductibles have also gone up."
But "even with the increases, most insurance companies probably lose money offering major medical and surgical. That is why mortality coverage is required to obtain major medical and surgical (insurance)," he added.
During their first year at stud, stallions can be insured against unknown congenital fertility problems that prevent them from getting at least 60 percent of the mares they are bred to in foal. Stallions are usually insured against accident, sickness or disease that would cause permanent infertility.
Owners of broodmares can insure their horses against barrenness, or failure to conceive. They can also buy prospective foal insurance that ends when the mare delivers a live foal that stands and nurses.
The downslide of the horse industry, which has been affected by the slow general economy, has, in turn, adversely affected the equine insurance business.
"The major problem has been the excess of supply (of insurance) versus the demand for it. Horse insurance is, to some extent, a discretionary purchase, and if the profits for horses business are under pressure, some owners decide to self-insure," Kirk said.
"The values of horses have declined approximately 30 percent from 2008 through 2010. Values of broodmares and stallions have come down as demand has tapered off," Nicholson said.
Not surprisingly, this decline in value has had a negative effect on the equine insurance business. Nicholson said, "Our premium is based on the value of the horse. The whole insurance pool has come down 30 percent."
The equine insurance business has been impacted adversely in other ways. One company moved from Lexington back to New York, and two equine insurance underwriting firms consolidated.
Kirk noted that more insurance companies are offering horse insurance.
"This has resulted in a more competitive environment for premium rates. This is actually very good for the average horse owner. (It's) clearly one of the best times to purchase equine mortality insurance," Kirk said.
Nicholson is fortunate that he also owns a general insurance firm, Cambridge Insurance. Besides non-equine clients, he can count on business from horse people here. Even if they aren't buying horses, they still need to insure their homes, cars and trucks, and farm equipment and buildings.
Like any experienced horseman, Nicholson knows that the horse business is cyclical.
"As demand increases, people breed more horses. After the supply exceeds the demand, the business suffers for a few years. From 1986 to 1992, it was way down. From 1993 to 2008 there was a gradual incline," he explained.
For Nicholson, the best part of his business is "the people we encounter - trainers, grooms, owners -they all have a common love and appreciation for the horse."
Kirk Horse Insurance can be reached at (859)231-0838, or online at www.kirk horse.com. Nicholson Insurance Agency can be reached at (859)224-7080, or online at www.nicholsoninsurance.com.