C. THE INSURANCE PROBLEM AND BUSINESS OUTLOOK 



Inasmuch as the insurance cost is part of the cost of fishing 

 operations, a full understanding of the insurance problem requires 

 an examination of the general business outlook in the commercial 

 fishing industry. The inquiry into whether and how the insurance 

 problem is related to over- all business conditions was made through 

 an analysis of the relation of gross receipts from fish landings to 

 losses of insurers. A discussion of the implications of this rela- 

 tionship, an examination of vessel population turnover, and a dis- 

 cussion of the vessel owner's feelings about business conditions 

 follows . 



1. Relationships between receipts and losses . Insurance 

 people maintain the thesis that a high, inverse correlation 

 exists between business conditions in the industry and severity 

 of hull insurance accidents. During \inprofitable years losses 

 rise, and during profitable years losses decline. 



In order to test the validity of this hypothesis, gross re- 

 ceipts from fish landings were related with the number of vessels 

 lost and claim losses of insurers in table 25- . In New England the 

 hypothesis was verified. During the six-year^/ period, 19^9-55* 

 as many as 23.3 vessels were lost per year over the three years 

 with the lowest receipts from landings- -$58-^ million per year, 

 while as few as 12.3 vessels per year were lost during the three 

 years with the highest receipts- -$65.1 million per year. The 

 same inverse relationship prevails with receipts and hull insur- 

 ance claim losses paid by insurers. During 1953-5^ claim losses 

 for hull insurance were as high as $2,^90 per policy year and re- 

 ceipts as low as $58.9 million per year, while during 1950-52 

 losses were as low as $75^ per policy year and receipts as high 

 as .ti65.1 million per year. 



The data do not seem to verify this hypothesis in the Gulf 

 Area. In fact, the relationship of receipts and hull insurajice 

 claim losses is direct instead of inverse. The observation, how- 

 ever, is superficial, and there are a number of reasons which may 

 explain why the data fail to show an inverse relationship. In the 

 first place, receipts in the Gulf Area were continuously rising 

 throughout the period studied except for the last year, 195^- 

 Therefore, the decline did not last long enough to show its effect 

 on the accident records. Furthermore, if the year 1950 is excluded 

 from the averaging as an abnormal year (table 25), claim losses for 

 hull insurance averaged as low as $336 per policy year and receipts 

 as high as $76.7 million per year during 1952-53, while during the 

 years 1951 and 195I1 losses averaged as high as $1,313 per policy 

 year and receipts as low as $68.1 million per year (computed from 

 table A-6k in Appendix A) . Secondly, the nvunber of vessels lost 



3/ Seven calender yeeirs — six fiscal years. 



99 



