The competitive pattern for protection and Indemnity insursince 

 in New England was different. Expectation of sizeable losses because 

 of large court awards made large insurance amounts highly desirable 

 to the owner. Alien insurers responded to the situation by drasti- 

 cally lowering the premium ratio. Thus, American companies charged 

 $46 for $1,000 of insurance, while the alien competitors charged 

 only $5 -60 for the same insurance amount (table 32). In contrast 

 to the competitive effects in hull insurance, the unprofitable 

 experience of alien insurers occurred because of low premium rather 

 than because of adverse selection of risks. VJhile American insurers 

 collected $3^601 per policy in net premium, they paid only $1,35^ in 

 losses and claim expenses per policy. By comparison, alien insurers 

 paid as much as $1,832 in losses and claim expenses per policy but 

 collected only $7^0 per policy in net premium (tables A-93 and 9U in 

 Appendix A) . 



Competition for protection and indemnity insurance took a 

 different course in California. Although the cost of insurance in 

 terms of premium ratio was higher among alien insurers than American 

 firms, the rate was too low for both groups. American insurers 

 charged $2.U0 for $1,000 of insurance while alien insurers charged 

 $5.50 for the same amount. As a result of this practice, both 

 groups collected a low net premium of $512 for American and $^56 

 for alien insurers, and both experienced unprofitable experience. 

 But losses by alien insurers were much greater because of adverse 

 selection of risks on their part. Paid losses and claim expenses 

 per policy were $l,l80 for alien insurers and only $it21 for 

 American companies. Reports from the area indicated that the 

 pool of American underwriters insisted on keeping rates do;m 

 because they feared that the rest of the protection and indemnity 

 insurance market would go to alien competitors. Some underwriters 

 with very bad loss experience wished ail risks were with the alien 

 Insurers from the beginning. 



The remarks of an interviewer about a vessel owner who carried 

 both kinds of insurance on his vessel may be considered most appro- 

 priate in describing the highly competitive state of affairs among 

 insurers. He says, "This man has changed companies four times and 

 gets better rates each time." 



In concluding the discussion on competition, it should not be 

 forgotten that the unprofitable experience of the majority of 

 insurers during I95O-5J+ may not necessarily mean actual losses to 

 a particular insurer. Actual losses of an insurer depended on his 

 break-even ratio, his reserves from previous years, and the profit- 

 ability of other business received in accepting the underwriting of 

 commercial fishing vessels. Also, his ability to stay in the market 

 or cease underwriting vessels depends on many other considerations 

 outside the scope of this survey. 



133 



