CIIG Advanced Diploma cheat sheet

Incoterms 2020 risk transfer points: EXW risk passes at seller's premises; FCA on delivery to carrier; FOB/CIF/CFR when goods are on board the vessel; DAP at named destination ready for unloading; DDP after import clearance and duty payment.

CIF and CIP oblige the seller to arrange cargo insurance for the buyer; under Incoterms 2020 CIP requires Institute Cargo Clauses (A) cover, CIF requires only minimum (C) cover unless otherwise agreed.

Minimum insured value under CIF/CIP is 110% of contract price in the contract currency, covering the buyer's insurable interest plus a 10% margin.

Under FOB, CFR, CIF, and FCA the buyer bears risk during main carriage; under DAP and DDP the seller bears risk until the named destination.

A documentary credit is independent of the sale contract; banks deal in documents, so a policy or certificate must match LC wording on insured, amount, currency, and risks covered.

Bill of lading types: a clean on-board B/L evidences shipment in apparent good order; a claused (foul) B/L notes damaged or defective packing and is often rejected under LCs.

Export credit insurance (e.g., ECAs) covers commercial and political buyer default; it is distinct from marine cargo cover, which responds to physical loss or damage in transit.

Customs value for duty is normally transaction value (price actually paid or payable) adjusted for freight and insurance where the importing country uses CIF valuation.

Insurable interest requires a pecuniary relationship to the goods; it must exist at the time of loss, not necessarily at inception (Marine Insurance Act 1906 s.6).

Indemnity limits recovery to the insured's actual loss; valued policies fix the agreed value and are conclusive between the parties absent fraud (MIA 1906 s.27).

Utmost good faith: the insured must disclose every material circumstance known to them; under the Insurance Act 2015 remedies for breach are proportionate (avoidance only for deliberate or reckless non-disclosure).

Proximate cause is the dominant, effective cause of loss; remote causes are disregarded when determining whether an insured peril operated.

Subrogation transfers the insured's rights of recovery against third parties to the insurer after payment, but only up to the amount paid (MIA 1906 s.79).

Contribution applies where two or more policies cover the same interest, peril, and period; each insurer pays rateably to its independent liability.

Average clauses reduce claims where the insured value is below the required percentage of sound market value; a 110% declaration clause avoids average in most cargo placements.

Duty of fair presentation under the Insurance Act 2015 requires disclosure of material circumstances, a reasonable search, and clarity so a prudent underwriter can assess the risk.

Institute Cargo Clauses (A) provide all-risks cover subject to exclusions; (B) and (C) are named-perils covers, with (C) narrower than (B).

ICC (B) adds earthquake, volcanic eruption, lightning, water damage from sea/lake/river entry, and washing overboard compared with ICC (C).

ICC (C) covers loss or damage reasonably attributable to fire or explosion, stranding, grounding, sinking, capsizing, collision, discharge at a port of distress, and sacrifice under general average.

Common ICC exclusions: wilful misconduct, ordinary leakage, insufficiency of packing, inherent vice, delay, insolvency, and unseaworthiness where the assured knew of it.

War and strikes risks are excluded from ICC (A), (B), and (C) and require separate Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo).

Duration under ICC transit clause runs warehouse to warehouse, commencing when goods leave the named warehouse and terminating on delivery, or on expiry of 60 days after discharge for onward storage.

General average requires a voluntary and intentional sacrifice for the common safety; cargo owners contribute to the loss based on arrived values.

Institute Replacement Clause limits recovery for machinery to repair or replacement cost plus expenses, not full insured value.

Rating factors include commodity susceptibility, packing, mode and route, carrier quality, transit duration, transhipment count, and container vs breakbulk.

Commodity classifications range from low-hazard (e.g., steel, timber) to high-hazard (e.g., bulk sugar, hides, cement, machinery subject to rust, theft-prone electronics).

Container vessels and roll-on/roll-off ferries carry different loss profiles; ro-ro cargo is more exposed to fire and total loss than containerized cargo.

Deductibles are per claim or per carrying conveyance; per conveyance deductibles apply to accumulations in one vessel or container.

Accumulation control is essential: a single vessel or container event may expose the insurer to many insured shipments at once.

Open covers and floating policies provide automatic cover for declared shipments within agreed terms; declarations must be made promptly and accurately.

Cargo risk is assessed against loss histories and trade routes; piracy-prone areas (e.g., Gulf of Aden) may attract additional premium or warranties.

Temperature-controlled cargo requires specific cover for deterioration and breakdown of refrigeration, often excluded unless endorsed.

Claims notification should be prompt; under ICC the assured must notify the insurer and take reasonable steps to avert or minimise loss.

Documentation: policy or certificate, commercial invoice, packing list, bill of lading, survey report, and claim form; missing documents delay settlement.

The assured must preserve rights against carriers; notice of loss to the carrier within the period set by the contract of carriage (often 3 days for apparent damage).

Surveyors are appointed to inspect damage, determine cause, and quantify loss; their report forms the basis of adjustment.

Loss must be proximate to an insured peril; if the loss is caused by an excluded peril (e.g., insufficient packing), no indemnity is due.

Partial loss settlement for a valued policy is proportional to the insured value; for an unvalued policy the basis is the sound market value at destination.

Salvage and sue-and-labour charges are recoverable separately from the sum insured and are not subject to average.

Claim payment triggers subrogation; the insurer receives a letter of subrogation and can pursue carriers, bailees, or third parties.

Particular average is a partial loss borne by the individual insured; general average is a shared sacrifice apportioned among all cargo interests.

Adjustment: gross loss less deductible, then apply average if the sum insured is below the required percentage of sound value.

Constructive total loss arises where the subject matter is abandoned or the cost of recovery exceeds its value after repair; notice of abandonment is required.

Actual total loss: total destruction, irretrievable deprivation, or goods so damaged they cease to be the insured commodity.

Subrogation rights are limited to the amount paid; any excess recovery belongs to the assured.

Contribution between insurers uses independent liability: calculate each policy's standalone liability and apportion accordingly.

Salvage charges are voluntary costs to save property from peril; sue-and-labour charges are incurred by the assured or agent to avert or minimise an insured loss.

Recoveries from third parties must be pursued within limitation periods; carriage conventions (Hague-Visby, Hamburg, Rotterdam) set differing limits.

The Marine Insurance Act 1906 remains foundational in England and many common-law jurisdictions, supplemented by the Insurance Act 2015 for commercial policies.

Sanctions screening is mandatory: insuring, paying claims for, or facilitating trade with sanctioned parties or vessels can breach UN, EU, UK, or US rules.

Anti-money-laundering obligations require customer due diligence, source-of-funds checks, and suspicious activity reporting.

Treating customers fairly and avoiding conflicts of interest are core conduct requirements; brokers must disclose remuneration.

Data protection laws (e.g., GDPR) govern handling of insureds' personal and commercial data during claims and underwriting.

Dual-use and arms embargo goods require export licence checks; insurers may need to verify end-use and end-user.

Whistleblowing and anti-bribery rules (e.g., UK Bribery Act) apply to intermediaries and claims handlers.

Ethical underwriting means accurate risk classification; misrepresenting commodity or route to reduce premium is material non-disclosure.

Facultative reinsurance covers a single risk; treaty reinsurance covers a portfolio under pre-agreed terms.

Quota share: the reinsurer takes a fixed percentage of every risk and premium; surplus share: the reinsurer takes risks above the cedent's retention.

Excess of loss reinsurance responds when a loss exceeds the cedent's retention, up to a limit; it is commonly used for catastrophe and accumulation protection.

Proportional treaties share both premium and losses; non-proportional treaties (XL) cover losses above a retention and are priced on exposure.

Capacity is the maximum limit an insurer can write; Lloyd's syndicates and company markets rely on reinsurance and capital to support large cargo lines.

Market cycle: soft markets bring capacity and rate reductions; hard markets follow large losses and reduce capacity, raising rates and deductibles.

Bordereaux and declarations under open covers allow the reinsurer to monitor accumulations and exposures.

Fronting arrangements place business with a licensed insurer that cedes most of the risk to a reinsurer, subject to regulatory approval.