When three-time Melbourne Cup runner-up Red Cadeaux broke his leg and had to be euthanised last year, many stopped to consider the harsh realities of the ‘race that stops the nation’.  But for veterans of the racing industry’s insurance sector, a broken leg is as common as it is fatal.

“You’ve got a 500kg animal with a tiny little brain and four little feet that it supports itself on, and they get inbred a fair amount – they’re highly susceptible to problems,” says Logan Livestock Insurance Agency Managing Director Richard Logan.

And according to HQ Insurance Managing Director Wayne Aldridge, who has more than 30 years’ experience in equine insurance: “That’s the nature of the industry. I doubt that a day would go by in Australia when there isn’t a claim.”

At the most basic level, bloodstock and livestock insurance cover the death of the animal – be it a thoroughbred racehorse, broodmare, hobbyhorse, sheep or alpaca.

“Mortality insurance covers death, either through natural causes, or an accident, injury, illness or disease so severe the vet says ‘it’s inhumane for this animal to remain alive’,” Aldridge explains.

Case study: Big winners, big risks

“Policy extensions can include life-saving surgery, which removes the nasty shock horse owners get when confronted with thousands of dollars in veterinary bills and after-care costs.” For globe-trotting competitors and shuttle stallions, international transit cover is considered essential, while risks associated with breeding can also be covered. “Regarding valuable to stallions at stud, first season sub-infertility and loss of income insurance are encouraged,” Aldridge says.

For broodmares, prospective foal (pregnancy) insurance is available, while loss of income insurance can cover owners who pay for stallion nominations.

Weighing the odds

Determining premiums for these products is a bit like a bookmaker setting odds on races – it boils down to perceived probabilities. Factors taken into account include the horse’s age and use – whether it’s racing, breeding or taken to pony club.

Distances from specialist veterinary care, stabling and type of insurance are also considered. But the value of the animal is the final key factor and often proves trickiest to quantify.

Inglis National Insurance Manager Beryl Brooks says she relies on registered bloodstock consultants to verify the market value of horses.

“This can often be a moving target, because if a horse wins a listed or group race, the value can increase dramatically. The value is something that a prudent insurance consultant monitors during the period of insurance,” Brooks says.

Accidents and injuries can decimate the market value of a horse in a split second. “If a gelding gets injured, suddenly it’s gone from being worth $100,000 to worth $2000 or $1500,” Logan says.

While equine insurance is traditionally priced according to market value, it can also be based on agreed value, which Aldridge prefers. “For the period of the policy we have comfort that in the event of a claim our client will be paid that amount of money, even though the horse might have run last, last, last and devalued,” Aldridge says.

Of course, agreed value can be reviewed within the policy period if the horse has a string of wins, rises in value and is at risk of being under-insured. Brooks says specialist knowledge and plenty of fieldwork is essential to make it in the industry.

“Regular attendance at the track, on property, in stables and at thoroughbred auction sales is extremely important for informed communication with clients, risk assessment and to keep abreast of market trends,” she says.

It’s not surprising then that turnover of equine insurance brokers is low and the community is close-knit. “You need to be accepted as part of the fraternity, because insurance is based on trust,” Brooks says.

The underwriting community is similarly small and well-connected. “I’ve known some of those [underwriters] for 30 years and that’s all important,” Aldridge says. “If there’s a claim that might be a bit sensitive, I can pick up the phone and speak to the person who actually makes the decisions.”