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Obviously whatever the old wire was, the boat got along with using it. BUT since the insulation has broken down, it is also very likely that wire was not sufficient or safe for that run. It could have broken down from outside heat (wire is rated for engine spaces and chemicals, or not) or internal heat, i.e. being too thin for the load and degrading over time.
If you have an ammeter, even a 10A ammeter in a $20 multimeter, you can test the wire to see what load it really is carrying. Or sum up whatever it is attached to. And also look to see if those circuits are fused on "the other end" so to speak.
If not...personally I would replace it with properly rated tinned wire (for engine spaces) and upsize it by one or two gauges "just in case".