The small diameter hose is reinforced rubber, and takes the cooling water from a higher point than the injection point into the exhaust. (Well, higher by whatever amount of room there is in the engine compartment...)
That hose wanders it's way aft to a little thruhull. This should be peeing out a small stream of water all the time the Universal diesel is running -- more when the revs are up over 2K and less at idle.
If someone disconnected it from the outlet on the boat, find that person and whack him with a winch handle.
The outlet is a few inches above the transom exhaust on our boat, and ideally should be higher up yet. In our situation the shape of the sloped upper transom evidently was allowed to dictate the location...
Cheers,
Loren
(Universal M25XP)