Stallion farms based outside of Kentucky will no longer easily be able to purchase first-year infertility insurance on stallion prospects that are “lesser-priced horses,” according to well-placed sources with connections to the insurance agencies and stallion operations.
Although not something that’s obvious to the general public, insurance against infertility is one of the nearly invisible layers of business that allows the great bloodstock machine to work smoothly year after year by protecting the investment and confidence of stallion operations and their syndicate members.
First-year infertility insurance is a policy written to protect a farm or buyer “in case you’ve syndicated a horse for major money that somehow has a congenital problem,” said Lynn Jones of Equus / Standardbred Station insurance. “These policies are written so that if a stallion isn’t able to get 60 percent of his mares in foal, then the farm or syndicate isn’t left holding the bag.”
Instead, by going through an insurance agent and underwriter, stallion buyers spread the risk of loss from that inevitability: the subfertile or infertile stallion. To arrange for a policy, Jones said, “You want a qualified vet to do the initial examination. They will measure the testicles, run a blood test, and the result is a huge protection device. But you can’t collect him or have a semen evaluation. Everyone goes in blindfolded, so to speak. It’s so commonplace that it’s now a built-in cost of the acquisition.”
The principal underwriters of insurance policies for horses, whether for accidental death (AD&D) or first-year infertility, are Lloyd’s of London, Great American, and NAS Swiss Re. These are giant international risk underwriters that back the insurance policies that local and national agents sell to farms or individuals.
One agent in Central Kentucky who preferred not to be named said that “Horse insurance, as a percentage of their equity underwriting, doesn’t amount to a rounding error to these major underwriters. But they perceive an elevated risk in regional markets relative to Kentucky and are being more selective.”
None of the selectivity applies to stallion operations in Kentucky because “we can be a little bit spoiled by the horse market and general environment here in the Bluegrass,” one agent said. “This is the epicenter of the stallion market. In regional markets, you can find variation in horsemanship – both in stallion and mare management, as well as in the availability of world-class veterinary facilities and specialists.”
As a result of this change of availability for first-year stallion fertility insurance, some regional breeders will have to make hard decisions about adding stallions to their rosters.
One regional breeder already has collided with this unexpected situation. He said, “Late last year, I bought a stallion prospect off the racetrack, called my Kentucky agent to get a quote for infertility insurance, and was told – eventually – that they had found an underwriter to cover it, but the rate was more than double what I would have paid the previous year.”
A well-known Kentucky agent said “it is likely to be more difficult for farms to insure stallions in the regional programs, but we can still get deals done. They might be more expensive, however, but if underwriters get a run of several years that do not generate claims, then they might change their views.”
One option for farms is to self insure, which essentially means to play the odds that your horse will have normal fertility. And Mark Toothaker of Spendthrift Farm in Kentucky said, “Spendthrift doesn’t insure any of its stallions against fertility loss. We don’t have a single horse on the farm insured. So far, we haven’t had a loss.”
And, despite the reluctance among some underwriters, there will be other underwriters available to service those who want to insure for first-year infertility, according to Jones.
He said, “We’ve been doing this since 1980, and, no matter the individual situation, there are underwriters you’ve been working with will take the time to write a policy for that animal.”
The policy just may cost something more.
This is one more dampening effect on the overall stallion market, which is none too robust outside the Bluegrass. Now, it has one more inefficiency to deal with.