Everything you need to know about Marine Cargo Insurance
The world is a lot smaller these days, even the smallest business can now move goods around the globe by land, sea or air.
Marine Cargo Insurance covers losses arising from physical damage to goods whilst being transported. They could be stolen whilst on route or destroyed at sea. The cover goes beyond Goods in Transit as it protects goods during loading and unloading, while in storage, or while being transported – domestically or internationally.
Whether you are a small online trader, retailer or a manufacturer involved in importing or exporting of goods or an individual sending a car, we can provide the correct Marine Cargo Insurance for you.
We can arrange insurance policies that will give you full cover and peace of mind for your goods in the event of a loss, whether transported by road, sea, air or rail.
With insurer minimum premiums typically starting as low as £300 per annum call now today for a no obligation quotation.
Why do you Need Marine Cargo Insurance?
Marine Cargo Insurance is the ideal way to protect your goods from financial risk, especially when a Carrier’s liability falls short. It’s an important requirement in certain contractual terms of sale, and many clients actually save money when they arrange their own policy rather than rely on the carrier’s coverage!
What are the Benefits of Marine Cargo Insurance?
- It reduces your exposure to financial loss.
- We typically find that clients make a saving when arranging their own policy.
- Protection from general average (in short a legal principle of Maritime Law, whereby all parties involved in a particular voyage, are required to proportionally share the losses resulting from a major loss or sacrifice of cargo).
- Save time and effort when dealing with international businesses. Do you really want to be negotiating with an insurer on the other side of the world? Leave the claims process to a UK insurer to fight on your behalf.
Who is Responsible for Insuring the Goods?
When cargo is moved from one place to another, numerous parties can be involved in the journey from A to B, each with their own responsibilities.
The contractual agreement between buyer and seller, known as the ‘Terms of Sale’, will determine who is responsible for what during the transaction.
These internationally recognised terms are called ‘Incoterms’ (short for International Chamber of Commerce Terms of Sale) and have been established to help reduce disputes and uncertainty in foreign trade.
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There are 11 Incoterms in total but below is a brief description of the four most commonly used.
- Ex Works (EXW) – responsibility for everything is on the buyer, that includes the transit, storage, costs and ultimately all the risk. The seller need only make the goods available at their premises for collection by the buyer.
- Free on Board (FOB) – the seller is responsible for the risk and for the costs of transporting the goods up to the point that the goods are safely loaded onto the vessel, after that point the buyer assumes full responsibility.
- Cost, Insurance and Freight (CIF) – is a contractual obligation on the seller to purchase marine cargo insurance. The insurance is assigned to the buyer at the point that goods are loaded onto the vessel, at which point the title and risk transfer to the buyer. Although the insurance is arranged by the seller any claims for loss or damage which occur after the point of assignment (loaded on the vessel) are payable to the buyer.
- Delivered Duty Paid (DDP) – the seller is responsible for the risk and for costs of transporting the goods up to the point that the goods are presented ready for unloading at the buyer’s named place.
Most importantly to the seller, they also have an obligation to clear the goods not only for export, but also for import. And to pay any duty for both export and import and to carry out all customs formalities that arise.
If you would like a more detailed diagram of the 11 Incoterms for your records please request one when speaking to an advisor.
Common objections to purchasing Marine Cargo Insurance
“I don’t need Marine Cargo Insurance because my carrier is responsible for loss or damage to my goods.”
Did you know that carriers don’t insure your cargo; only their liability for loss or damage? Carriers mostly contract on the basis that they are only responsible for compensation based on the weight of the goods carried. For example, Road Carriers use Road Haulage Association conditions, which limit their liability to £1,300 per tonne. That may sound like a lot until you entrust to them with expensive high-tech equipment which may be valued at £40,000 but only weighs 15kgs. The compensation provided by the carrier in this instance would be £21.49!
With Sea carriage the compensation limit is 2 SDRs per kilo – Wait what is an SDR?
Special drawing rights (SDRs) It is a currency unit used worldwide as a method of determining value. They are defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF. They are not a currency per se. They represent a claim to currency.
So 2 SDRs = about £ 2 per kilo, (based on 1 SDR = £1), so about £ 30 compensation for the £40,000 of equipment.
“I don’t need Marine Cargo Insurance because the overseas seller is responsible for insuring the goods.”
Check your contract because depending on the terms of sale, the seller may only be responsible until the goods are loaded onboard the overseas vessel only, after that point the goods are at the buyer’s risk – insurance is required for the remaining transport.
However, if the seller is responsible for arranging the insurance under the terms of sale for the entire journey, they are only responsible for arranging the minimum level of cover available to them locally.
Coverage differs around the world for insurance, it may not always include accidental damage! If the goods arrive damaged, there will be no cover and you will still have to pay for the goods. Furthermore, if you are shipping a large amount of goods, why would you want to rely on a third parties insurance? – the claim could be rejected due to non-payment or non-disclosure leaving you left to deal directly with the seller for compensation. Do you have the time and wouldn’t it be easier for you to let your insurer deal with this contingent risk on your behalf?
“I don’t need Marine Cargo insurance because my goods are safely packed in containers and the goods always arrive in one piece.”
It’s not all smooth sailing in the ocean, unfortunately. Containers are subjected to extreme weather conditions. Goods can break free inside the container and be damaged in heavy seas and storms.
Containers are often lost overboard due to bad conditions. In 2020 one cargo ship lost 2,000 containers alone. But also accidents happened on board. VW group vehicles were lost in the Felicity Ace fire in the Atlantic at a cost of roughly $155M.
If the goods survive all of that, you may still be landed with a large bill if the vessel gets stranded or the voyage is abandoned to save the vessel.
When a container ship wedged the Suez Canal in 2021 it created a very large ‘General Average’ bill for cargo owners. This was estimated to be in excess of 50% of the value of the cargo. A Marine Cargo Insurance policy will pay the bill if you have insurance but if not, you will be forced to pay the money before any cargo is released.
To Conclude: If your business insurance is due or you are thinking about arranging marine cargo insurance for the first time and you would like to see what options are available, give us a call. We are a Kent-based independent insurance broker (no call centres). We’re happy to offer you advice and answer any questions you may have. We offer a free risk review service for local businesses. Call us today to discuss your business or to book an appointment.
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