Four point guide

to standard Cargo insurance

1. Types of Policies
Open covers are available for regular importers or exporters. These are permanent
contracts tailored to suit a clients specic requirements. The open cover automatically insures all consignments falling within agreed parameters set at time of inception. are subject to a deposit premium based on the estimated annual insured value of goods. infrequent basis. Each policy is arranged as and when required.

Annual policies are similar to open covers, except they are issued for one year only and Single policies are individual policies for companies importing or exporting on an

2. Covers Available
There are 3 basic internationally recognised sets of clauses known as Institute Cargo Clauses. The widest is A or Air, but more restricted covers are available B and, the more commonly used, C clauses for clients preferring to pay a lower premium and accept part of the risk themselves or who are shipping robust cargoes that are not too susceptible to accidental damage.

Institute Cargo Clauses A, Air

The most popular clauses in use; covering All Risks of physical loss or damage including General Average and Salvage charges, subject to certain exclusions: Wilful misconduct by the insured or his agents, insufcient packing, ordinary loss in volume or weight, ordinary leakage, delay, inherent vice, unseaworthiness of the carrying vessel, insolvency of the shipping line and losses caused by a radioactive source.

Institute Cargo Clauses B

The B Clauses are more restricted than A in that they cover major casualties to the carrying conveyance and certain other named perils:

Major Casualties - Fire and Explosion, Vessel stranded or grounded, sinking, capsizing,

overturning or derailment of land conveyance, collision or contact with an external object, discharge at port of distress, general average and salvage charges. jettison. Other named perils - Earthquake, volcanic eruption or lightning, washing overboard, entry of sea, lake or river water, total loss of package dropped during loading or unloading.

Institute Cargo Clauses C

The most restricted of the sets of clauses, providing cover only against the major casualties listed in B clauses.

War and Strikes Clauses

These clauses are used in conjunction with the A B or C clauses and cover loss or damage to cargo resulting from war, revolution, insurrection, civil strife, hostile act by or against belligerent power, strikes, labour disturbances, riots, terrorists, persons acting from a political motive.

3. Who Arranges Insurance Cover?

Buyer Seller Insurance Broker Bank Freight Forwarder Shipping Company? The ultimate beneciary is generally the buyer or seller and arranging the cover is dependant on the terms of sale. This diagram shows some common examples (Ex-works, FOB, CFR, CIF) indicating whose responsibility it is to insure.

COMMONLY USED TERMS OF SALE

Warehouse at origin
Ex Works (EXW) Free On Board (FOB) Cost & Freight(C&F, CFR) Cost Insurance Freight (CIF)

Port/ Airport

Port/ Airport

Warehouse at destination

Seller Insures

Buyer Insures

*Sometimes seller's cover ceases on arrival at destination port and buyer will need to insure from port to final warehouse

4. Modes of Transportation
Cargo can be carried by Sea, Air, Road and/or Rail. Insurers set a standard for selection of a ship by the provision of another Institute Clause: The Institute Classication Clause: This clause provides that if vessels are classied by members of the International Association of Classication Societies such as Lloyds Register, Bureau Veritas, American Bureau of Shipping, Nippon Kaiji Kyokai, Norske Veritas, Indian Register, and are not over a certain age, they are acceptable. If they fall outside these limits then rates and/or conditions need to be agreed with insurers. The following are the age limitations:

Vessels with regular trading patterns:

Container vessels, Vehicle carriers 30 years All other vessels - 25 years

Vessels without regular trading patterns:

Bulk carriers - 10 years Other Vessels - 15 years