CHAPTER II 

 THE OWNER'S DILEMMA: 

 TO CARRY OR NOT TO CARRY INSURANCE ON HIS VESSEL 



The vessel owner has two basic altematives, either to insure his 

 vessel for hull and. protection and indemnity with risk ceurriers, or 

 himself assxmie either or both of these risks. Although the choice 

 does not seem to create serious difficulties for some vessel owners, 

 for a large majority of them whether to insure or not creates, to a 

 varying degree, a dilemma. 



The decision of the vessel owner in this matter at any time is 

 shaped by a number of factors. Let us examine the probable factors 

 as reflected in the extent to which some owners have chosen to 

 assume the full risk themselves while others have insiired with 

 the several risk carriers in this country and. abroad. 



A. EXTENT OF INSURANCE AND NONINSURANCE 



1. Proportion and nvimber of insured and noninsured vessels . 

 Table 1 shows the average percentage of active vessels on which 

 insurance was carried for one or more years daring 1950-5^ in each 

 geographical area. About two-thirds of the sampled active vessels 

 in New England were insured for hull and protection and indemnity 

 insurance. Only about half of the active vessels in California 

 carried both kinds of insurance. While in the Gulf Area the per- 

 centage of active vessels insured for hull is a little smaller than 

 that in California, as little as 12 percent of Gulf Area vessels 

 carried insiirance for protection and indemnity. These percentages 

 are fairly steady for each year of the period 1950-5^ in all cases 

 except in protection and indemnity insurance in the Gulf Area where 

 it increased steadily from as low as 8.3 percent in 1950 to as high 

 as 15-7 percent in 195^ (see basic tables in Appendix A). 



According to statistical estimates which are derived from the 

 basic schedules no more than ^6 percent of all active vessels in New 

 England, 50 percent in Gulf, and 56 percent in California are likely 

 to have carried hull insurance in any one year during the period 

 1950-5^- The maxima percentages for protection and indemnity 

 insurajice axe estimated at 7^ percent, 17 percent, and 53 percent in 

 the three areas, respectively. On the basis of the active vessel 

 population in each area at the end of 195^ and these maxima per- 

 centages, no more than 61O vessels in New England, 1,015 in Gulf, 

 and 760 in California are likely to have been insured for hull in 

 any one year throughout the period 1950- 5^ • The estimated average 

 yearly number of vessels on which protection and indemnity insurance 



was carried is 594, ^k2, and 722 in the three areas, respectively. 



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