They are not essential in that the boat will work without one, however everybody is assuming they will be around if it all goes haywire and things start shorting out.
Boat wiring is in a poor enviroment and is not always of the standard that it should be. I have always had one fitted on every boat for emergency shutdown when I am on it and something happens (never yet thankfully) but more importantly shutting down the system when I am away so it isn't possible for the boat to turn itself into a molten puddle due to a short or problem.
I have had a car, twenty ears ago and a heap admittedly, start smoking from under the dash due to a short. Luckily it was just as I pulled up at home and I managed to get the battery off before much more than a few melted wires were caused under the dash. I dread to think what would have happened if it had been 5mins later once I had got out and went inside.........
its a peace of mind thing really.