Australia’s enduring love of horse racing puts the bloodstock insurance market on firm ground

By Harris Pozderovic

Despite controversies on and off the track and challenges such as the cost of living and changing attitudes to gambling, horse racing remains an Australian obsession.

Australians own more racehorses per capita than any other nation, with thoroughbreds competing in more than 20,000 races a year, none more significant than the Melbourne Cup. Winning the “race that stops a nation” is the pinnacle of achievement in the sport, but there are plenty of other big-money races out there.

Even after its days on the track are over, a winning horse – especially one from an established bloodline of success – can carry a significant sale price. This means owners often view horses as a financial investment, and incur significant costs for security, care and cover against potential losses.

While coverages vary, a bloodstock policy is designed to insure a thoroughbred’s value. It can also cover broodmares, stallions, foals and yearlings. Policies generally cover death due to natural causes or accidents, plus losses from theft and transit costs. Additional plans also cover surgery fees, the value of prospective foals and other areas of incident.

Various factors feed into premium costs, including a horse’s valuation, age, use, previous medical history, and economic and market considerations.

“The appetite for bloodstock insurance seems to be much greater in Australia than in other territories.”
Markel’s Juliet Redfern

But as Markel International Divisional Managing Director of Equine and Livestock Juliet Redfern explains, insurers will take a good look at the owner as much as the horse.

“When pricing bloodstock insurance policies for mortality (the predominant cover) we look at the individual insured – their … loss record for the past five years, regardless if insured or not, in terms of value and also in terms of the number of horses lost against how many they owned,” Ms Redfern tells Insurance News.

“We will consider individual loss scenarios – such as: is the cause the same for each horse or different; were they in the same location or different; was the use the same or different? – to see if we can draw any conclusions from the information immediately available to us.”

Despite the perception of higher risk for an active racehorse than one used for breeding, Ms Redfern says there is little premium difference between the two.

She notes death rates are a critical factor considered by insurers, with foaling season – typically between August and November – a time of particular exposure.

“To a layman, one might think a racehorse was a higher risk than a broodmare, given that one is galloping at speed regularly on very spindly legs compared with a mare that eats grass all day long in a paddock, but the stats don’t accurately reflect that,” Ms Redfern says. “In terms of death rate when insured they are a similar risk and so these days are rated very similarly.”

While Australia currently has a strong market for bloodstock policies, it has faced volatility and challenges in the past decade, including low premium rates due to high competition, causing profitability issues for Lloyd’s syndicates and managing general agents, and foreign owners choosing to self-insure. About five years ago, the market faced a breaking point, with many insurers posting unsustainable results, underwriters reducing line sizes, and premiums rising more than 50% from previously low rates.

The market has since shown self-correction and recovery. Ms Redfern says rates have stabilised to a “good position for both customers and insurers”. The market’s health has been “driven by an excellent racing environment providing fantastic prize money”, which incentivises owners to seek security for their investments.

“The appetite for purchasing bloodstock insurance seems to be much greater in Australia than in other global bloodstock territories, with a higher proportion of owners buying [the cover] in Australia than elsewhere,” Ms Redfern says.

“The racehorse syndication system in Australia also opens the sport to many more people who are able to buy a share of a horse for a small outlay and enjoy all the excitement that racehorse ownership can bring. This of course makes insurance a necessity for the syndicate owner or manager, so the syndicate shareholder will get some of his investment back should the horse die and an insurance policy is paid out.”

The sport’s strength has driven up the value of the horse breeding industry, which Ms Redfern says is in “robust health”.

“With more [group 1 races] run in Australia than in other racing nations, this also drives competition among farms for the top bloodline. This is reflected in the yearling sales ring, where untried one-year-old horses are sold based on looks and pedigree, everyone hoping to find the next champion.”

Most local bloodstock insurance brokers place cover with European giants such as Lloyd’s and Swiss Re. However, local underwriters have begun to emerge, with Berkshire Hathaway Specialty Insurance and Bloodstock Insurance Australia entering the market. Markel recently opened offices in Sydney, Melbourne and Brisbane, although it intends to continue its bloodstock underwriting from London.

The Australian bloodstock market is expected to record gross written premium of between $90 million and $100 million this financial year.

It has also attracted mergers and acquisitions activity in recent years, with global broking giant Howden among the most active groups, securing several bloodstock specialist businesses since entering the local market in 2021.

Howden Pacific chief Matt Bacon says racing “is part of the fabric of Australian society”

“Racing is part of the fabric of Australian society and part of the fabric of Howden globally.”
Howden Pacific chief Matt Bacon

Howden Pacific Chief Executive Matt Bacon tells Insurance News that, in launching operations in Australia, the company sought to address a “lack of choice” in the specialised market.

“A lack of choice for clients, a lack of choice for insurers and a lack of choice for brokers who want to work for a fast-moving, truly entrepreneurial, international organisation that empowers them to make decisions and has trust and friendship at the centre of everything that it does.

“The speed in which we have been able to accelerate into the market has proven our hypothesis – there really was a gap and we really are filling it.”

Last November Howden acquired a majority stake in Sydney bloodstock broker HQ Insurance, and earlier this year it bought Silks Insurance. These moves followed the purchase of Tysers’ UK bloodstock broking team last February and two acquisitions by underwriting arm Dual.

Mr Bacon says Howden’s approach to the market is “clearly resonating” and “only really getting started”.

“The last thing we are here for is to make up the numbers,” he says. “That’s simply not the ‘Howden way’. We are here to push, push very hard, and have a lot of fun while doing it.”

The broker has boosted its brand by partnering with major racing events. It signed a three-year deal to be the Victoria Racing Club’s official insurance partner and a sponsor for the Melbourne Cup Carnival. Howden was also naming rights partner for the Howden Australian Guineas Day at Flemington in March.

“From minute one of our very early engagements with the [Victoria Racing Club], it was clear that our cultures were highly aligned,” Mr Bacon says.

“Racing is part of the fabric of Australian society. Racing is part of the fabric of Howden globally. As a result, a partnership between ourselves and the club made complete sense to us.”

HQ Insurance Chief Executive Dean Morley was familiar with the world of racing long before he launched a career in broking. For eight years, he worked at broadcaster Sky Racing, before moving to various bookmakers. Since making the shift to bloodstock insurance, he says he hasn’t looked back.

“The ability to work in the industry I live and breathe but also to get most of my weekends off is something I count myself lucky to have,” he tells Insurance News.

Mr Morley began working at the broker in 2018 as an account executive and media and marketing manager. He says a key lesson he learned early on was to treat each client like the last.

“You don’t know who will be calling next,” he says. “It could be a multimillionaire owner with 100 horses on cover or a 5% shareholder in one horse, but come Saturday, that one horse could win a $20 million race and all of a sudden that owner has joined the millionaires’ club.

“One client a few years ago bought into two horses at the yearling sales. [It was] his first venture into horse ownership. Both horses went on to win multiple group 1 races and now stand at stud for $50,000 plus per serve, serving 200 mares a season. Lucky bloke.”

Mr Morley says the partnership with Howden will expand HQ’s reach, and he cites Howden founder and Chief Executive David Howden’s passion for racing as a key driver of the deal.

“Through my early dealings with the team, they are an inclusive business and have been very welcoming. We are already in talks internally with different businesses owned by Howden Australia to diversify our risk offering. Stay tuned.”