D. FURTHER REMARKS ON INSURANCE COST 



It has already been pointed out that averaging and sanrpling may 

 have underemphasized the actual insuremce cost in each axea. In fact, 

 the extent of the financieil burden imposed on the vessel owner by a 

 rising insurance cost cannot be fully appreciated without further 

 analysis. 



The owner's decision to carry insurance on his vessel may entail 

 not only the payment of premium but other financial burdens. Reports 

 from insurers indicate that the rising tide of claims during the five- 

 year period had later compelled them to raise their ssifety standards 

 for underwriting a commercial fishing vessel. Higher safety standards 

 requiring more frequent or regular bottom inspection, installation of 

 safety devices, better selection of crew, and better upkeep of the en- 

 gine, machinery, and equipment may create expenses in addition to the 

 payment of premiijms. Although credits may be given to owners \Aio 

 improve the safety of their vessels, these credits are not always 

 given to him; or, if he receives them, premium savings of several 

 years may be required to recover the additional cost. Furthermore, 

 prepayment of the premiums and expenses for improving the safety of 

 the vessel often requires short-term borrowing with interest charges 

 further increasing the cost of insurance . Last, but not leeist, the 

 insiurance contract is a legal document subject to interpretation. 

 Adverse loss experience may be accompanied by the lengthening of 

 the period required for the adjustment of claims, creating additional 

 inconvenience to the owner if not always additional expense. These 

 remarks illustrate how the cost of carrying insurajice may have risen 

 more than the figures indicate because of expenses incidental to the 

 rise in the premium and to the decline of the insurance coverage. 



But the greatest increase in the owner's financial burden of 

 insursmce cost seems to come from another direction. V/hether the 

 cost of insurance is high depends to some degree on whether other 

 operational costs are also rising and, to an extraordinary degree, 

 on whether gross receipts from fish landings are falling. In other 

 words, the cost of insurance may not be so burdensome because this 

 cost has risen, but because receipts from fish landings have fallen. 



E. THE LOSS EXPERIENCE OF INSURERS 



1. The insurer's break-even ratio . The study of loss 

 experience of risk carriers is essentially a study of the insurance 

 problem from a different, but equally important vantage point, for 

 the price the insured vessel owner pays for insurance protection is 

 the revenue which the insurer receives for selling this protection. 



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