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Cargo Insurance

When you are looking at the types of cargo insurance available, you may come across the term General Average. This is one of the oldest principles of cargo insurance and relates only to ocean and sea voyages but is still relevant in today's trading environment. General Average covers the situation where damage or loss of certain goods occurs so that the remaining cargo and the means of transport are saved. For example goods may sustain water damage during fire fighting. In this situation, if General Average is declared, all the parties involved must contribute to covering the loss.

Cargo insurance is usually provided by the means of one of three Institute Cargo Clauses - A, B or C, plus War Clauses and Strikes Clauses. Simply put Cargo Clauses A provide the most cover with B and C giving less coverage which is reflected in reduced premiums for the lower cover (somewhat similar to car insurance cover with comprehensive, third party, fire and theft, and third party policies). Also there is an Institute Cargo Clauses (Air) for movement by air, which is equivalent to the A clauses.

Quadris Cargo Insurance

What types of cargo insurance are available?

Open Cover

This is the most usual type of cargo insurance, where a policy is drawn up to cover a number of consignments. The policy can be either for a specific value that requires renewal once the insured amount is exhausted or an permanently open policy that will be drawn up for an agreed period, allowing any number of shipments during this time.

Specific (Voyage) Policy

Although not the norm for cargo insurance, you may from time to time need to request an insurance policy for a particular consignment. This is usually referred to as Voyage Policy as the insurance covers only that specific shipment.

Contingency (seller's interest) insurance

As an exporter you may often sell goods on terms where your customer (as the importer) is responsible for insuring (or at least bearing the risk of damage of or loss to) the goods, for example under FOB and CFR Incoterms 2000. In these cases you are exposed to the risk of damage to the goods while in transit and your customer refusing to accept them. In the worse case your customer may not have insured the goods.

If this happens and your customer attempts to avoid liability, you could seek redress through the legal system. However, this can prove very expensive, and may often be pointless. Seller's interest insurance, usually for a small premium, will cover you for this contingency. For valid commercial reasons you may not wish your customer to know you have taken out such a policy.

What other options are open to me?

There are several other ways to approach the risk involved in the physical movement of the goods you trade across international borders:

Do nothing and carry the risk yourself. If an incident occurs resulting in damage or loss to the goods you could take action against the carrier. But you should remember that carrier liability is strictly limited by internationally agreed conventions. Also you will need the expertise and perseverance to sustain a successful claim. This could have an impact on your business;

As an exporter you can let your customer insure the goods

As an importer you can let your supplier insure the goods.

For further information or a quotation call Quadris Insurance Brokers on:
0208 144 1271 or email us insure@quadrisinsurance.co.uk




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