Cargo, Hull, and Transit Risk Management
Transit risk management requires matching the Incoterms risk transfer point to the insurance arrangement. Under CIF and CIP, the seller arranges insurance; under FOB and CFR, the buyer bears risk once goods are on board and arranges its own cover. The Institute Cargo Clauses (A, B, C) grade coverage: (A) is all-risks, (B) adds named perils with some exclusions lifted, and (C) is the narrowest named-perils form. All three exclude inherent vice, insufficient packing, delay, and ordinary leakage.
Hull cover responds to perils of the seas, fire, collision, grounding, and sue-and-labor, with Inchmaree additional perils for negligence. Key hull concepts include constructive total loss (repair cost exceeds insured value), actual total loss, particular average, and general average. Transit risk also involves warehouse-to-warehouse clauses, duration limits (typically 60–90 days at destination), and termination on delivery.
Traps: (1) Thinking (A) clauses cover everything - they still exclude inherent vice and delay; (2) confusing CIF (seller insures to destination) with FOB (buyer insures); (3) overlooking the general average contribution the cargo owner owes even when its own goods are undamaged; (4) forgetting the duration limit after discharge.
Rule of thumb: the risk transfer point follows the Incoterm - match insurance to that point, not to the invoice date.
Worked example: Goods sold CIF Rotterdam. The seller must insure to Rotterdam under Institute Cargo Clauses (C) at minimum. If the buyer wants all-risks, it must negotiate (A) clauses or buy its own cover - the CIF minimum does not provide it.