Insuring the services of a thoroughbred: should smarty Jones fail to produce an heir, insuring him may be more expensive than his owners planned.

First Season Infertility Cover, like just about all equine coverage, has been subject to the laws of the hard market and rising prices, according to carriers and brokers. And this year's surge of interest in horse racing didn't help matters.

Julian Bowen-Rees, Global Practice Leader for XL Insurance's Equine division, which provides global equine insurance coverage for thoroughbreds and racehorses, says there are "big challenges" facing the marketplace.

Rates have been rising for more than three years, he says, and the hard market is a reaction to large losses companies had been absorbing for years. "There was an unprecedented run of large claims, with more than 10 claims in excess of $10 million dollars," he said.

The industry is also being hit by a contraction in the number of companies underwriting equine policies. Between London and Kentucky, the two hubs of the equine insurance industry, Bowen-Rees counts just 10 companies providing thoroughbred insurance coverage to horse owners and farmers.

"The industry is about supply and demand and right now [equine insurance] supply is somewhat restricted," says Joe Nicholson, principal agent of Nicholson Insurance Agency in Lexington, Kentucky. "And insurance can be, as we know, feast or famine."

So amidst the hard market, what kinds of coverage are horse owners buying for studs like Smarty Jones as they retire from the track to the breeding farms?

"Mortality, coverage for the death and theft of the horse, is the most common type of equine insurance," Bowen-Rees says. Around 90 percent of the coverage purchased are mortality policies, estimates Nicholson.

Other popular products on the equine market today include Prospective Foal policies, which insures that the mare carries a foal for the full term and through a predetermined time after its birth.

Another product, First Season Infertility Cover, is a fertility performance policy for horses just retired and off the racetrack. The most common First Season coverage insures against a stallion achieving less than a 60 percent fertility rate in its first breeding season.

Given the rising premiums and the shrinking supply, some horse owners are not insuring at all, opting instead to self-insure their horses and farms. "Self-insurance is not a major trend," Nicholson says. "But people are definitely thinking about it and some are actually doing it."

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