Marine Transit / Cargo Insurance – Frequently Asked Questions

For marine cargo insurance tips and advice, see our Frequently Asked Questions section below.

What is marine cargo insurance and its types?

Marine Cargo insurance provides cover for loss or damage to a wide variety of goods being transported by Sea, Air, Road and/or Rail. Examples of claims include goods being stolen en route, damaged due to adverse weather conditions, destroyed in a collision etc. Marine cargo cover extends beyond just goods in transit, as it includes cover for your goods during loading and unloading, whilst in storage in the ordinary course of transit and while being transported domestically and internationally, subject to such transits being declared and insured.

The term ‘marine cargo insurance’ can be somewhat confusing, as your goods don’t need to be transported by sea for a marine policy to be suitable! Originally, marine cargo insurance protected 17th century merchants sending goods abroad by sea, however nowadays road, rail and air are equally important means of moving goods.

What is important to realise is that the word ‘marine’ doesn’t restrict the means of transport to ships. For many transits, goods will start their journey by road or rail, before being loaded aboard a vessel or plane for the sea or air transit, with the final movement to the destination being by road or rail. Marine Cargo Insurance covers the entire movement, irrespective of the means of transport and a number of different means. 

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Who needs marine cargo insurance?

Marine Cargo insurance provides important financial protection for anyone who imports, exports and/or transports goods within the United Kingdom. Marine Cargo insurance can cover a range of goods, from raw materials and single components, through to finished products and appliances. It’s designed for businesses of all sizes that import, export and/or distribute goods around the United Kingdom. At Insurance2day we can arrange Marine Cargo insurance cover for manufacturers, wholesalers, retailers and distributors, or indeed anyone who has goods that they are looking to transport. 

All too often, companies mistakenly assume that their hauliers provide insurance for cargo carried. However, hauliers only cover their legal liabilities for loss or damage. There are of course instances where cargo is damaged whilst the haulier is transporting it and if the haulier is found to be negligent (therefore liable), compensation payments are controlled by their contract conditions, such as RHA Conditions of Carriage 2009. If, for example, three tonnes of cargo was worth £15,000, the haulier would only be liable to pay £1,300 per tonne under standard RHA conditions. Marine cargo insurance is therefore of utmost importance if you don’t want to be left significantly out of pocket for such shortfalls.

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What is covered by marine cargo insurance?

Unique to the marine market, and adopted by major marine insurers around the world, Marine Cargo policies are traditionally made up of a series of standard clauses, called Institute Cargo Clauses.

The three most common types are Institute Cargo Clauses A, B and C. Clause A provides cover on an ‘All Risks’ basis (where the individual perils are not named) and is therefore the most comprehensive cover, whereas Clauses B and C have some significant restrictions. 

The C clauses cover such perils as:

  • fire and explosion
  • grounding or stranding of the vessel
  • jettison of the cargo (disposing of the cargo over the side of the ship deliberately)
  • sinking
  • collision
  • damage to the cargo if it has to be discharged after damage to the ship

The B clauses cover all the above perils but add three very important ones which are:

  • washing overboard (accidently losing the cargo over the side as opposed to jettisoning or disposing of it deliberately)
  • entry of sea, lake or river water to the vessel or place of storage. However, note that this peril does not cover rainwater, sprinkler water or condensation type damage
  • total loss of a package by falling overboard

Trade Clauses are used to further tailor a policy, to reflect the nature of goods being carried. In addition policy warranties may be applied, these need to be fully complied with for indemnity to be afforded in the event of a claim.

Marine cargo policies can be tailored to include additional covers, such as:
– Stock throughput (i.e loss or damage to goods whilst stored at a premises, outside the ordinary course of transit.)
– Tools, Samples and Own Equipment
– Buyers and/or Sellers Contingent Interest
– Exhibition Risks

Key exclusions under the Institute Cargo Clauses A, B and C include:

  • Wilful misconduct of the insured – deliberately causing damage to the cargo
  • Wear and tear or inherent vice – the natural behaviour of cargo without any external influence (such as cargo ripening or ferrous metals rusting)
  • Insufficiency of packing – this is a relative concept as the measure is the appropriate packing for that particular cargo, which is not standardised across all cargos. The sender should always package goods sufficiently enough to minimise the risk of damage occurring in transit. Factoring in multiple methods of transport, in challenging conditions and over a lengthy period.
  • Insolvency of the carrier – this is to try and focus cargo interests minds on the quality of those with whom they do business
  • Delay – even if the delay is caused by a peril insured against. This is because insurers are not interested in covering loss of market
  • Unseaworthiness – particularly if the insured was aware or should have been aware at the time of loading. The concept of unseaworthiness is not just a ship with holes in her hull but also incompetent crew, or missing vital equipment such as radios or navigation devices.
  • Unfitness of a container or other conveyance (truck etc) to carry the cargo
  • Malicious damage – this is only in the ICC B and C Clauses
  • War – piracy is not included in this exclusion
  • Strikes
  • Nuclear

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What is the difference between marine and marine cargo insurance?

Marine insurance covers the loss or damage to boats and other watercraft. (i.e. ships, cargo vessels, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination), however it doesn’t extend to cover damage or loss to the actual goods being carried.

Marine cargo insurance covers losses arising from physical damage to goods whilst being transported to insured regions around the world, whether by road, rail, sea or air. If you are importing or exporting goods, then you need marine cargo insurance.

As an insurance broker we have over 20 years’ experience arranging marine cargo insurance policies for our clients and will gladly answer any questions you may have. 

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How Does Cargo Insurance Work?

If you import, export and/or send goods domestically, it’s important to check who is responsible for insuring (before a loss happens) and the level of cover afforded. Many people think that a carrier’s insurance will cover goods, but  that’s not always the case! Marine Cargo insurance works by protecting your financial interest in the goods being shipped, in the event of loss or damage whilst in transit. 

UK: UK Goods in Transit

For UK: UK Goods in Transit, RHA Conditions of Carriage provide restricted financial liability and only cover a carrier’s legal liabilities, excluding Acts of God. Specifically, the standard RHA limitation of £1,300 per tonne can result in significant uninsured losses where separate marine cargo or goods in transit insurance isn’t arranged. 

The incorrect assumption that carriers / hauliers provide adequate cover can be an expensive one, as hauliers tend to only offer a very low level of cover as standard.

European Transits

When goods are going to/from Europe, the Hauliers liability is limited to CMR Conditions of Carriage. Unless cover is arranged on an All Risks basis, there are many clauses within CMR Standard Conditions which support the haulier in the event of a claim, including (but not limited to) negligence.

By understanding the scope of cover afforded by your carrier, you can then evaluate any gaps in cover and decide the level of financial risk you are willing to take. By having a Marine Cargo insurance policy, you have the peace of mind of knowing that your insurer would provide indemnity in the event of a claim and that recovery from the carrier in accordance with the terms and conditions applicable would be a matter handled by their recoveries department. 

Importing/Exporting

If using a freight forwarder, it is important to check what Conditions of Carriage apply. Many UK freight forwarders operate under BIFA Standard Trading Conditions, which limit the carrier’s liability.

Under BIFA the freight forwarder can either be the Agent or the Principal:  

If they are the Agent, then they are authorised by the insured to enter into any and all contracts to get the goods from A to B. If they incorporate the conditions and contract within 14 days to the customer, then in the event of a claim the owner of the goods has to go to all the subcontractors the freight forwarder has provided to get a settlement.

If the terms and conditions aren’t incorporated within 14 days, then the freight forwarder automatically becomes Principal, so you can go after the freight forwarder for recompense, however they may still direct you to the Haulier involved. 

N.B. BIFA also excludes cover for General Average.

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Why Buy Marine Cargo Insurance?

  1. To Reduce Your Risk of Financial Loss
    The whole purpose of a marine cargo insurance policy is to reduce your exposure to financial loss in the event that goods you are buying or selling are damaged or lost in transit. Since most marine risks are completely outside the cargo owners’ control, purchasing Marine Cargo insurance can help ensure that your business can withstand even the most damaging or unexpected events.
  2. Protection From ‘General Average’
    Under ‘General Average’ all cargo owners proportionately share losses resulting from voluntary sacrifice, or costs incurred in order to prevent a total loss. Following the declaration of a ‘General Average’, cargo is held pending receipt of General Average Guarantees and Bonds. By purchasing marine cargo insurance, your insurers will liaise with the necessary parties and provide the required guarantees to allow your cargo to be released. 
  3. To Fulfil your Contractual Obligations
    Marine Cargo insurance is often required to fulfil the contractual terms of sale and to protect the interests of any banks or third parties helping to finance the transaction. 
  4. Because Carrier’s liability insurance doesn’t provide full protection

Haulage and shipping companies’ liability is limited by contract or law, so even though they may be responsible for the transportation of your goods, in the event of a loss your carrier’s insurance won’t fully protect your goods! Carrier’s liability insurance doesn’t cover many common causes of loss, such as ‘General Average’. Where compensation is provided, this is often at a value significantly less than the full valuation of the goods and pursuing overseas hauliers for a loss can be a challenging and time-consuming task.

5. To Stay in Control!
Being in control of your own insurance policy is a benefit that is often overlooked. Whilst marine cargo insurance may be included as part of a sales contract, is this the best option for you? For example, if you import goods from China and the cost of marine cargo insurance is included as part of the sales contract, consideration needs to be given as to what would happen in the event of the goods being damaged or lost en route. What are the financial ratings of the Chinese insurer? What scope of cover will the Chinese insurer be providing? Who would you be dealing with to process your claim? The simpler alternative is for U.K. companies to arrange their own marine cargo insurance, via a U.K. broker and insurer, with the sales contract being amended to reflect that responsibility for insurance now sits with the buyer. Not only can it be more cost effective to arrange cover on this basis, in the event of a claim, the process should be much quicker and easier.

As with many insurance covers, the true value of a policy is only apparent when making a claim. At Insurance2day, our specialist knowledge and experience can help you ensure that you are sufficiently covered.

Hopefully, the above will assist in providing a greater understanding of the benefits of arranging your own marine cargo insurance cover. 

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How much does marine cargo insurance cost?

Premium ratings for Marine Cargo insurance are determined by the nature of the goods, the attendant risk aspects, where they are going, the medium of transport, expected duration etc. A rate percent on the value is then arrived at, taking into account the following:

– The total value of the goods for any one conveyance
– The theft attractiveness of the goods
– The scope of insurance cover required
– Where the goods are going from and to
– The quality and nature of packing
– How the goods are transported – just by sea or by various methods?
– How large a deductible or excess is required
– The claims/loss history

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Who Is Responsible For Arranging Marine Cargo Insurance Cover?

Internationally recognised terms called ‘Incoterms’ detail the contractual agreement between buyer and seller, determining who is responsible for what during the transaction. When cargo is moved from one place to another, numerous parties can be involved, each with their own responsibilities. 

There are 11 Incoterms in total, however only two of these (CIF and CIP) place a contractual obligation on one party to purchase insurance and even then, only a minimum level cover is required. Given the potential implications if cargo is lost or damaged en route, it is prudent to purchase insurance wherever a party bears responsibility for the risk.

The 4 most common Incoterms are as follows:

Ex Works (EXW) – passing the responsibility for everything to the buyer. All the seller is required to do is make the goods available at their premises for collection by the buyer.

Free on Board (FOB) – the seller is responsible for the risk and for costs of transporting the goods up to the point that the goods are safely loaded on to the vessel, after which the buyer assumes full responsibility.

Cost, Insurance and Freight (CIF) – the seller is contractually obliged to purchase insurance. The insurance is assigned to the buyer at the point that goods are loaded on to the vessel, when the title and risk transfer to the buyer. Although the insurance is arranged by the seller any claims for loss or damage which occur after the point of assignment are payable to the buyer.

Delivered Duty Paid (DDP) – the seller is responsible for the risk and for costs of  transporting the goods up to the point that the goods are presented ready for unloading at the buyer’s named place. Crucially, the seller also has an obligation to clear the goods not only for export, but also for import, to pay any duty for both export and import and to carry out all customs formalities.

N.B. Buyers and/or Sellers Contingent Interest cover can be arranged to cover your contingent financial interest in respect of any goods where you have no responsibility to insure under the terms of sale.

Details of the 11 Incoterms can be viewed via the following link: https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/ 

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If you would like a no-commitment quote to cover your imports, exports and/or domestic transits, simply complete our quote enquiry form below:

Marine Cargo & Transit Insurance Quote Request

If you’re not sure what your requirements are, we will gladly discuss with you to ensure that your financial interests are best protected. Please Call us on 01384 442 165 (Mon-Fri, 9am-5pm), or Email: marine@insurance2day.co.uk. We can provide same day quotes for most marine cargo risks.