that there Is a favorable selection of risks by the insiirers. 

 Subsequent discussions will show that the opposite is more likely to 

 be true. Nor does it follow that these characteristics are exclusive 

 factors for insurance or noninsurance . On the other hand, it is not 

 denied that other things being equal, a vessel better built, properly 

 manned, ajid equipped will be insured at a lower rate than another 

 vessel which lacks these characteristics. The relation of insvired 

 and noninsured vessels, with regard to safety standards apparatus 

 and equipment, is likely to be spurious, being primarily the function 

 of vessel size. 



Material of hull . All active steel vessels in New England and 

 almost aJ.1 in the other two areas are insured. On the other hand, 

 only 7^ percent of the active wood vessels are insured ■vrtaile all 

 insured vessels represent 77 percent of the sample in New England, 

 43 percent compared to 46 percent in the sample in the Gulf Area, and 

 55 percent com^pared to 62 percent in the sample in California (table 

 5) . One important factor for such a difference in the proportion of 

 insured vessels between active steel and active wood vessels seems 

 to be vessel size. 



The importance of vessel size . Of all the physical characteristics 

 of vessels discussed, size is apparently the most critical from the 

 viewpoint of hull insiorance. In the first place, the fact that a vessel 

 is small is, and of itself, a major factor in that hull insurance rates 

 are inversely related to size. Other things being equal, the smaller 

 the vessel the higher the rate. (See discussion on rates in Chapter Vl). 

 Secondly, although age, material of hull, rig, or safety equipment may 

 be important in the decision to insure or not to insure, these 

 characteristics are almost incidental to size. 



Actually, the fact that a vessel is small may act as a serious 

 deterrent to insurance. Let us assume that a 75 gross ton vessel is 

 insured for as much as $50,000 at 5 percent insurance rate and another 

 vessel of 20 gross tons for $10,000 at 10 percent. Although the annual 

 premiuju paid by the owner of the first vessel is laxger than the premiijm 

 paid by the owner of the second and smaller vessel, with these premliams 

 the first owner would be able to write off the value of his vessel 

 (assuming market value of vessel equals the amount of insurance) in 20 

 years, while the second owner would need only 10 years to be able to 

 do the same. 



The financial burden to the small vessel owner becomes almost 

 unbearable where high insurance rates coincide with limited fishing 

 operations. This condition becomes the most convincing argument 

 against insuring, especially where other reasons for insurance are 

 not present. The following quotation from a vessel owner is appro- 

 priate to the subject: "Carried hull in 1950 for partnership reasons 



27 



