Logistics guides · Risk & insurance
Marine Cargo Insurance: Coverage Options, Insured Value and Claims
What ICC (A), (B) and (C) cover, war and strikes clauses, insuring at CIF + 10%, CIF versus CIP, how to make a claim and what general average means.
Carriers’ liability for lost or damaged cargo is limited by international conventions and by the terms of the bill of lading or air waybill, and in many situations the carrier is not liable at all. A container lost overboard, water damage after a vessel fire or a general average declaration can leave an uninsured cargo owner with a total loss or a large bill. Cargo insurance closes that gap. This guide explains the standard Institute Cargo Clauses, war and strikes cover, how to set the insured value, the insurance obligations under CIF and CIP, the claims process and general average.
Why carrier liability is not enough
Under the Hague-Visby Rules, which shape many ocean bills of lading and Vietnam’s Maritime Code, a carrier is exempt for losses caused by, among other things, fire not caused by its actual fault, perils of the sea and errors in navigation or management of the ship. Where it is liable, compensation is capped per package or per kilogram, which is often far below the value of manufactured goods. Air carriers’ liability under the Montreal Convention is also limited per kilogram. Insurance pays according to the policy, regardless of whether a carrier is at fault, and the insurer then pursues the carrier by subrogation.
Institute Cargo Clauses (A), (B) and (C)
Most international cargo policies use the Institute Cargo Clauses published in London, in the 2009 edition. Clauses (A) are written on an all risks basis subject to exclusions; clauses (B) and (C) cover only named perils.
| Risk | ICC (A) | ICC (B) | ICC (C) |
|---|---|---|---|
| Fire or explosion | Yes | Yes | Yes |
| Vessel stranded, grounded, sunk or capsized | Yes | Yes | Yes |
| Overturning or derailment of land conveyance | Yes | Yes | Yes |
| Collision or contact of vessel or conveyance with an external object | Yes | Yes | Yes |
| Discharge of cargo at a port of distress | Yes | Yes | Yes |
| General average sacrifice and jettison | Yes | Yes | Yes |
| Earthquake, volcanic eruption or lightning | Yes | Yes | No |
| Washing overboard | Yes | Yes | No |
| Entry of sea, lake or river water into vessel, container or place of storage | Yes | Yes | No |
| Total loss of a package lost overboard or dropped during loading or unloading | Yes | Yes | No |
| Theft, pilferage, non-delivery, rough handling and other accidental damage | Yes | No | No |
All three sets share the same general exclusions, including wilful misconduct of the insured, ordinary leakage, ordinary loss in weight or volume and ordinary wear and tear, insufficient or unsuitable packing, inherent vice of the goods, delay, insolvency or financial default of the owners or operators of the vessel in certain circumstances, and nuclear or radioactive contamination. War and strikes are excluded and must be added through separate clauses. Clauses (B) and (C) also exclude deliberate damage by wrongful act of any person, which can be bought back under a malicious damage clause.
Insufficient packing is excluded under all three clauses. Packing that is adequate for the voyage, including stowage and securing inside the container where the insured or its employees do it, is a condition of cover, not a detail.
War and strikes cover
The Institute War Clauses (Cargo) cover loss caused by war, civil war, hostile acts, capture and derelict mines or torpedoes. For sea transits, war cover generally applies only while the goods are on the overseas vessel, under the waterborne agreement, not while they are on land. The Institute Strikes Clauses (Cargo) cover loss caused by strikers, locked-out workers, riots, civil commotion and terrorism, and usually run warehouse to warehouse like the main cover. Both are commonly added for a small additional premium, subject to the insurer’s cancellation and listed-area provisions.
Duration of cover
Under the transit clause, cover usually attaches when the goods are first moved in the warehouse at the named place for loading into the carrying vehicle and continues during the ordinary course of transit. It ends on completion of unloading at the final warehouse at destination, when the goods are used for storage outside the ordinary course of transit, or on the expiry of 60 days after discharge from the overseas vessel at the final port, whichever occurs first. Delays in clearing goods at destination can therefore leave cargo uninsured unless an extension is arranged.
Insured value: CIF plus 10 percent
The usual market practice is to insure goods for their CIF value plus 10 percent, in other words 110 percent of the cost, insurance and freight value, with the additional 10 percent representing the expected profit and incidental costs. Where duties or a higher resale margin are at stake, the buyer can agree a higher percentage with the insurer. Insuring for less than full value can lead to an average adjustment, in which a claim is reduced in proportion to the under-insurance.
Insurance under CIF and CIP
Incoterms® 2020 make CIF and CIP the only rules that oblige the seller to buy insurance for the buyer’s benefit. Under CIF, used for sea and inland waterway transport, the minimum is cover equivalent to ICC (C). Under CIP, which applies to any mode including containerised and multimodal transport, the minimum is cover equivalent to ICC (A). In both cases the minimum sum insured is 110 percent of the contract price, in the currency of the contract, and the parties may agree different cover. Incoterms® is a trademark of the International Chamber of Commerce.
Buyers under CIF should therefore check whether ICC (C) is really sufficient for their goods, since it does not cover theft, water damage from heavy weather or rough handling. Under all other rules there is no insurance obligation, and the party bearing the risk should arrange its own cover. Exporters on FOB or FCA and importers on CFR, CPT or DAP often hold an annual open cover policy so that every shipment is insured automatically.
How to make a claim
- Act immediately when you notice loss or damage: take reasonable steps to minimise further loss, as the policy requires.
- Notify the insurer or the survey agent named in the certificate and request a joint survey before the goods are moved or repaired.
- Note exceptions on the delivery receipt or equipment interchange receipt, and give written notice of loss to the carrier. Under the Hague-Visby Rules, notice should be given at delivery or within three days if the damage is not apparent.
- Keep evidence: photographs, damaged packaging, seal numbers, temperature records for reefers and weight tickets.
- Submit the claim with the insurance policy or certificate, commercial invoice, packing list, bill of lading, survey report, letter of claim to the carrier and the carrier’s reply, and any other documents the insurer requests.
- Preserve rights against the carrier. The time limit for a cargo claim under the Hague-Visby Rules is one year from delivery, and the insurer will rely on those rights after paying.
General average
General average is a long-standing principle of maritime law: when an extraordinary sacrifice or expense is intentionally and reasonably made to save the ship and cargo from a common peril, for example jettisoning cargo, fighting a fire or hiring salvors, all parties to the voyage share the cost in proportion to the value of their property saved. Contributions are usually calculated under the York-Antwerp Rules by an average adjuster and can take years to settle.
When a shipowner declares general average, cargo will only be released against security, typically a general average bond signed by the cargo owner plus a guarantee from the cargo insurer, and separate salvage security where salvors are involved. Insured cargo owners can usually obtain the guarantee quickly from their insurer. Uninsured cargo owners must provide a cash deposit, which can be a significant percentage of the cargo value, before they receive their goods, even if their own cargo was undamaged.
GLG can arrange cargo insurance with reputable insurers for single shipments or under an open cover and assist with surveys and claims documentation.
Frequently asked questions
Which is better, ICC (A) or ICC (C)?
ICC (A) is broader, covering all risks of physical loss or damage except listed exclusions, while ICC (C) covers only major casualties. For manufactured or high-value goods, ICC (A) is usually recommended.
Why insure at 110 percent of CIF value?
The extra 10 percent covers the buyer’s expected profit and incidental costs. It is market practice and the minimum required under Incoterms® CIF and CIP.
Does insurance cover delay?
No. Loss caused by delay is excluded under all Institute Cargo Clauses, even if the delay results from an insured peril.
What happens if my cargo is not insured and general average is declared?
You must provide a cash deposit or other security accepted by the average adjuster before the carrier releases your cargo, and you will share the general average costs.
This content is for general guidance and does not replace legal or banking advice for a specific transaction.