Shipping & logistics

Cargo insurance (marine cargo insurance)

Insurance against loss of or damage to goods and related expenses during transit. Cover is usually defined by the Institute Cargo Clauses (A, B or C), with war and strikes risks added by separate clauses. The sum insured is typically 110 % of the CIF value. Which party insures depends on the Incoterm; under rules other than CIF and CIP, whoever bears the transit risk should buy its own cover. Claims require a survey report, bill of lading, invoice and a damage report.

Related terms

Institute Cargo Clauses (A), (B), (C) ICC (A)(B)(C)

The standard cargo insurance conditions drafted in the London market and used worldwide (latest edition 2009). (A) is “all risks” cover, paying for any loss or damage except listed exclusions; (B) covers named perils such as fire, sinking, collision, earthquake, lightning and entry of seawater; (C) covers only major casualties – fire, explosion, sinking, stranding, collision and general average. For raw materials exposed to theft, wetting or handling damage, (A) cover is recommended.

Cost, Insurance and Freight CIF

A sea-transport term that adds, to CFR, cargo insurance taken out by the seller in the buyer’s favour. Under Incoterms 2020 the minimum cover for CIF is Institute Cargo Clauses (C) for 110 % of the contract value; if broader “all risks” (A) cover is wanted it must be written into the contract. Risk still passes when the goods are loaded on board at the port of shipment, so the seller pays freight and insurance but does not carry the voyage risk.

Carriage and Insurance Paid To CIP

A term for any mode of transport that adds, to CPT, transit insurance bought by the seller in the buyer’s favour. Incoterms 2020 raised the minimum cover under CIP to Institute Cargo Clauses (A) – “all risks” – whereas CIF stays at (C); the insured amount is 110 % of the contract value. Risk passes when the goods are handed to the first carrier.

General average GA

The sharing of deliberate sacrifices and expenses made to save the ship and cargo from a common peril – jettison, salvage fees, firefighting – among the ship and all cargo owners in proportion to their values. It is calculated under the York-Antwerp Rules. When a shipowner declares general average, every receiver must provide security before taking delivery of its cargo; uninsured buyers may have to put up large cash deposits.

Explained in the trade handbook

Trade handbook