Cargo Insurance

Q1: What is cargo insurance and what does it cover?

Cargo insurance (also called marine cargo insurance) protects the physical value of goods against loss or damage while in transit - whether by road, rail, sea, or air - and while in temporary storage during the course of transportation.

A comprehensive cargo policy typically covers:

• Physical loss or damage during transit - including accidents involving the vessel, aircraft, or vehicle such as sinking, crash, or fire
• Theft and hijacking - including piracy on international sea routes
• Malicious damage - deliberate damage to cargo during handling or transit
• Natural perils - storm, flood, earthquake, and lightning affecting goods in transit or temporary storage
• Handling errors - dropping, crushing, or inappropriate loading of freight
• Contamination and temperature excursion - particularly relevant for food, pharmaceutical, and chemical cargoes requiring controlled conditions
• General average - a maritime principle where all cargo owners proportionally share the financial loss from emergency actions taken to save a voyage (such as jettisoning cargo to prevent a ship from sinking)

What cargo insurance does not cover: inherent vice (the natural tendency of certain goods to deteriorate), deliberate damage by the insured, loss caused by inadequate packaging, or losses arising from delay (unless specifically endorsed).

Q2: What is the difference between all-risks cargo cover and named perils cover?

The most important decision when arranging cargo insurance is the breadth of cover - all-risks versus named perils - which determines how claims are assessed and the burden of proof on the policyholder.

All-risks cover (based on Institute Cargo Clauses A):

• Covers physical loss or damage from any external cause unless specifically excluded in the policy
• The policyholder simply needs to prove the loss occurred during the insured transit - they do not need to prove how
• Provides the broadest protection and is the recommended standard for most commercial cargo shipments
• Excludes inherent vice, delay, inadequate packing, and war/strikes (which require separate endorsements)

Named perils cover (Institute Cargo Clauses B or C):

• Covers only the specific perils listed in the policy wording (fire, explosion, vessel grounding, collision, etc.)
• If the cause of loss is not one of the listed perils, the claim is rejected regardless of the loss value
• Cheaper than all-risks but provides significantly narrower protection
• Clauses B and C differ in the number of named perils included - Clauses C is the most restrictive

For most UK importers, exporters, and distributors, Institute Cargo Clauses A (all-risks) is the appropriate standard. Clauses B and C are sometimes used for bulk commodity shipments where the risk profile is simpler and the premium saving is material.

Q3: What are the Institute Cargo Clauses and why do they matter?

The Institute Cargo Clauses (ICC) are the internationally standardised policy wordings used for marine cargo insurance, developed by the London Institute of London Underwriters (now International Underwriting Association). They are the foundation of virtually every cargo insurance policy arranged in the UK market.

There are three main versions:

Clause	Coverage Level	Best Used For
ICC A	All risks (broadest)	General commercial goods, manufactured products, electronics, consumer goods
ICC B	Named perils (intermediate)	Bulk commodities, steel, timber, some agricultural goods
ICC C	Named perils (narrowest)	Low-value bulk cargo where premium cost is the primary driver

Additional specialist clauses include:

• ICC (Air) - for air freight shipments
• Institute War Clauses (Cargo) - extends cover to war, mines, and hostile acts (often required for shipments to or through high-risk regions)
• Institute Strikes Clauses (Cargo) - covers losses caused by strikers, locked-out workers, or civil commotion

Your WAIB broker will specify which ICC clause applies to your policy and can advise on whether war and strikes extensions are appropriate for your trade routes.

Q4: Does cargo insurance cover goods stored in a warehouse during transit?

Yes - a well-structured cargo policy can extend to cover goods held in temporary storage during the course of an international or domestic transit, but the conditions and limits of this cover need to be clearly understood before relying on it.

Under the standard Institute Cargo Clauses, transit cover operates on a warehouse-to-warehouse basis - this means the policy can attach from the moment goods leave the seller's warehouse and remain in force through intermediate storage until delivery at the final destination.

Key conditions to verify:

• Duration limits - ICC policies typically impose a storage time limit (commonly 60 days) within the transit coverage. Storage beyond this limit may not be covered under the transit policy; separate warehouse cover would then be required
• Storage location - goods must be in storage as an ordinary part of the transit journey, not placed into extended storage for commercial reasons unrelated to the transit
• Accumulation limits - if large quantities of goods accumulate at one storage point, the policy may have a per-location limit that could be breached

For businesses with a continuous flow of goods into storage and then outbound to customers - such as wholesalers and distributors - a stock throughput insurance policy is often more appropriate than relying on cargo transit extensions.

Q5: What is stock throughput insurance and how does it differ from cargo insurance?

Stock throughput insurance is a specialised form of cargo and property cover that insures goods on a continuous, end-to-end basis - from the moment they are manufactured or purchased, through all stages of transit, storage, and distribution, until they reach the final customer.

The key difference from standard cargo insurance:

	Cargo Insurance	Stock Throughput Insurance
Coverage period	Transit events only	Continuous - transit + all storage
Storage cover	Limited (transit incidental)	Full, including third-party warehouses
Policy type	Per-shipment or open cover	Annual, all-locations basis
Best for	Importers/exporters with discrete shipments	Wholesalers, distributors, manufacturers with continuous stock flow
Administration	Shipment-by-shipment declarations	Single annual policy, simplified reporting

Stock throughput is particularly valuable for UK wholesale and distribution businesses that import goods, hold them in UK warehouses, and then distribute to UK or international customers. It eliminates the potential gap between marine cargo cover ending and warehouse property cover beginning, ensuring no uninsured period exists anywhere in the supply chain.

Q6: What is carrier liability and why isn't it enough to protect your cargo?

When you use a freight forwarder, haulier, shipping line, or airline to transport your goods, they hold a legal liability for loss or damage to cargo in their care. However, this liability is strictly limited by international conventions and standard trading conditions - typically far below the actual commercial value of the goods.

UK and international carrier liability limits by transport mode:

Mode	Convention	Typical Liability Limit
Road (UK/Europe)	CMR Convention	SDR 8.33 per kg (~£9–10/kg)
Sea freight	Hague-Visby Rules	SDR 666.67 per package or SDR 2/kg
Air freight	Montreal Convention	SDR 22 per kg (~£24/kg)
Rail	CIM Convention	SDR 17 per kg

For context: a 10kg parcel of electronics worth £3,000 would receive a maximum air freight liability payout of approximately £240 under the Montreal Convention. The remaining £2,760 is an uninsured loss.

Additionally, carriers can further limit or exclude liability through their own standard trading conditions (RHA conditions for UK road hauliers, BIFA conditions for freight forwarders). Cargo insurance bridges this gap entirely, covering the full commercial invoice value of the goods regardless of what the carrier pays out.

Q7: Does cargo insurance cover imports and exports differently?

The same core policy framework applies to both imports and exports, but there are important practical differences in how cargo insurance is arranged depending on the Incoterms governing your trade contracts.

Incoterms (International Commercial Terms, published by the International Chamber of Commerce) define at which point in the supply chain the risk of loss or damage transfers from seller to buyer. This directly determines which party is responsible for arranging cargo insurance:

Incoterm	Risk Transfer Point	Who Should Insure
EXW (Ex Works)	At seller's factory gate	Buyer (importer) from point of collection
FOB (Free on Board)	When goods cross ship's rail at loading port	Buyer (importer) from port of loading
CIF (Cost, Insurance, Freight)	Seller arranges transit insurance	Seller (exporter) - but buyer should check adequacy
DDP (Delivered Duty Paid)	At buyer's premises	Seller (exporter) throughout

A common risk gap: under CIF terms, the seller arranges insurance but is only contractually required to arrange minimum cover (ICC C - the narrowest). The buyer should arrange their own all-risks (ICC A) top-up policy to ensure full protection. WAIB advises all importers to arrange their own cargo cover regardless of the Incoterm, rather than relying on a seller's policy.

Q8: How do I make a cargo insurance claim?

Cargo insurance claims require prompt action and careful evidence preservation to succeed. The following process applies to most UK cargo insurance policies:

1. Notify your insurer or broker immediately - report the loss or damage as soon as it is discovered. Most policies require notification within a specified period (commonly 7–14 days of delivery). Late notification can jeopardise your claim.
2. Note the exception on the delivery receipt - when accepting damaged goods from a carrier, clearly note the damage or shortage on the carrier's delivery note (CMR note, bill of lading, or air waybill) before signing. Signing without exception significantly weakens your claim against both the carrier and insurer.
3. Preserve the damaged goods and packaging - do not dispose of damaged goods, pallets, or packaging until the insurer or their appointed surveyor has inspected them. Premature disposal can result in claim rejection.
4. Obtain a survey report - for high-value losses, your insurer will appoint a cargo surveyor (average adjuster or loss adjuster). Cooperate fully and provide all relevant documentation.
5. Submit your claim documentation - typically required: commercial invoice, packing list, bill of lading or airway bill, delivery receipt with exceptions noted, photographs of damage, and repair or replacement cost estimates.
6. Subrogation - once your insurer has paid your claim, they will pursue the carrier for recovery under their own liability. You must cooperate with this process and must not settle directly with the carrier before the insurer is involved.

WAIB manages the claims process on behalf of clients, including surveyor appointment and carrier pursuit.

Q9: How much does cargo insurance cost in the UK?

Cargo insurance premiums are typically expressed as a rate per £100 or £1,000 of insured value (the cargo value plus freight costs and a percentage uplift, commonly 110% of invoice value).

Indicative UK cargo insurance rate ranges:

Cargo Type / Route	Typical Rate Range
General manufactured goods (UK/Europe road)	0.05% – 0.15% per shipment
General goods (intercontinental sea freight, ICC A)	0.10% – 0.35% per shipment
Electronics and high-value goods	0.25% – 0.75% per shipment
Food and perishables (refrigerated)	0.20% – 0.50% per shipment
Chemicals and hazardous goods	Individually rated
Open cover (annual policy, all shipments)	Negotiated rate applied to declared turnover

For businesses with regular shipping volumes, an open cover cargo policy (also called a floating policy) is significantly more cost-effective than insuring each shipment individually. Under an open cover, a single annual policy covers all shipments up to an agreed maximum per conveyance, with declarations made periodically.

Q10: What is the difference between cargo insurance and freight insurance?

These two terms are frequently used interchangeably but refer to distinct types of cover that protect different parties in the supply chain.

	Cargo Insurance	Freight Insurance
Who it protects	The cargo owner (shipper, importer, exporter)	The carrier or freight forwarder
What it covers	Physical loss or damage to the goods themselves	The freight revenue the carrier loses if cargo is lost
Who arranges it	The business that owns the goods	The transport operator
Claim trigger	Damage to or loss of the goods	Loss of freight revenue due to total loss of cargo
UK relevance	Essential for any business shipping goods	Relevant for hauliers, shipping lines, freight forwarders

As a cargo owner - whether importer, exporter, wholesaler, or distributor - you need cargo insurance, not freight insurance. Freight insurance is arranged by the carrier to protect their own commercial interest in the freight revenue.

An additional important distinction: freight forwarder's liability insurance covers a freight forwarder's legal liability to their clients for errors, omissions, and negligence in arranging transport - this is also distinct from cargo insurance and does not substitute for the cargo owner arranging their own policy. WAIB arranges cargo insurance for cargo owners and separately arranges freight forwarder's liability for logistics operators.