Marine Cargo Insurance Principles and Underwriting (IC-60)
Underwriting the cargo risk
Cargo underwriting turns on the subject matter (goods, packing, containerisation), the conveyance (vessel age, class, flag, OPA/ISM status), the route and transit (including inland legs and transhipment), and the terms of sale (CIF, FOB, CFR) which determine who bears risk and therefore who insures. Open covers with declarations, annual turnover declarations and cancellation clauses are central. Know the difference between a voyage policy, a time policy (hull) and an open cover (cargo), and the significance of a warehouse-to-warehouse transit clause with its 60-day termination on delivery.
Rating and terms
Rates reflect commodity susceptibility (breakage, theft, moisture, contamination), packing adequacy, stowage (deck cargo is usually excluded), and duration. Deductibles, ISM/classification warranties, and the duration of cover on delay are commonly tested.
Traps
- Assuming cover continues indefinitely in a warehouse - the transit clause terminates it.
- Overlooking that deck cargo requires specific agreement.
- Confusing CIF (seller insures) with FOB/CFR (buyer insures).
- Ignoring that a declaration under an open cover must be made honestly and promptly.
- Forgetting that inadequate packing is a classic exclusion.
Rule of thumb
Underwrite the Commodity, Conveyance, Condition of packing and Cover required - the four Cs - then price for the worst realistic transit, not the average one.