number of things: the difference in the 

 level of these expenditures as between the 

 more and less efficient trawlers; the tend- 

 ency for these expenditures to be higher 

 in years of high receipts and lower in 

 years of low receipts; and, the degree of 

 association between individual vessel re- 

 ceipts and expenditure for gear, repair, 

 and maintenance. 101/ 



A direct relationship of vessel re- 

 ceipts and vessel expenditures for gear, 

 repair, and maintenance offers a plausible 

 explanation for the lack of any substantial 

 year to year variation in the relative per- 

 formances of individual vessels of this 

 class, 200 gross-tons and over, (table V-9). 

 The more efficient trawlers, by reason of 

 the level of earnings, are adequately re- 

 paired and properly maintained, and proper 

 maintenance reinforces other factors in- 

 suring a continuation of their performance 

 or at least diminishes the risk of a sharp 

 decline in receipts due to physical fail- 

 ures of the vessel. In a like manner the 

 less efficient vessels, with substantially 

 lower receipts, are inadequately repaired 

 and maintained, and improper maintenance 

 compounds other deficiencies, human or 

 mechanical, further diminishing the possi- 

 bility of improved future performance and 

 increasing the risk of a further decline 

 in receipts due to the physical failure of 

 the vessels. 



b. Insurance 



The possibility that differences in 

 vessel receipts, their impact on vessel 

 maintenance, and probable influence on fu- 

 ture performance , may explain the contrast- 

 ing behavior in insurance expenditures of 

 the more and less efficient trawlers, can- 

 not be overlooked. In the years 1953-1955, 

 all but one of the more efficient trawlers 

 experienced a slight decline in the cost 



of their insurance. Again in 1956 and 

 1957 all of the more efficient trawlers, 

 with one exception, had a slight decline 

 in the cost of insurance. All the less 

 efficient trawlers 200 gross-tons and over, 

 which furnished data for either period, ex- 

 perienced substantial increases in the cost 

 of insurance for the years 1953-55 and 

 again for the years 1956 and 1957. 



Initially in our investigation no 

 attempt was made at segregating the cost of 

 hull insurance from the cost of protection 

 and indemnity insurance. Later, efforts 

 were made at obtaining the specific cost of 

 hull insurance and protection and indemnity'' 

 insurance. Such efforts met with little 

 success. Published material and the com- 

 ments of individual insurance brokers, how- 

 ever, did provide data and insight for a 

 discussion of the insurance question. 



A recent analysis, of the problems of 

 the commercial fishing industry with marine 

 insurance, discovered that there is a high 

 inverse association of receipts and hull 

 insurance losses. 102/ The report noted 

 that "The possibility that a vessel owner 

 may consider the hull insurance contract as 

 a means of overcoming impending financial 

 difficulties either partially or wholly 

 cannot be overlooked," and "At times of 

 falling receipts and mounting bills, the 

 tenptation to take advantage of the pro- 

 visions of the insurance contract may be 

 very strong." 103/ Although the probable 

 presence of moral hazard is not to be 

 denied, it is felt that with regard to 

 vessels included in this investigation of 

 cost and earnings the major cause of any 

 increase in the cost of hull insurance 

 could be primarily attributed to a rise in 

 accidents due to improper and inadequate 

 repairs and maintenance. 



The investigation of Messrs. Danforth 



101/ Boston owners generally agreed that in many instances repair and maintenance 

 expenditures are influenced by monies available. Gear costs, however, should not vary 

 greatly from year to year unless there are wide changes in vessel activity. 



102/ Danforth, W. C. and Theodore, C. A., Hull Insurance and Protection and 

 Indemnity Insurance of Ctommercial Fishing Vessels , Special Scientific Report Fisheries 

 No. 2U1. Washington, D. C, 1957. p. 101. 



103/ Ibid., p. 101. 



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