A container leaves the port, something goes wrong in transit, and the exporter assumes cargo insurance will cover the loss. Then the claim gets rejected — because the policy only covered named perils, because the damage is classed as inherent vice, or because nobody actually arranged cargo insurance and the Incoterm made the other party responsible for cover that was never put in place. This happens more often than it should on a first export to West Africa, where transit times are longer, transhipment is common, and handling at destination adds risk points that don’t show up on a packing list.
What cargo insurance actually covers
Marine cargo insurance is written against the Institute Cargo Clauses, and the letter after the name matters more than most exporters realise. ICC (C) is the narrowest: it pays out only for a short list of named events, such as the vessel sinking, fire, or the ship being stranded. ICC (B) adds some further named perils, including seawater damage. ICC (A) is close to all-risks cover, insuring against loss or damage from any cause except a defined list of exclusions — things like inherent vice, inadequate packing, and war or strikes unless bought back separately. Under CIF or CIP, the seller’s obligation is only to buy the minimum level of cover, ICC (C), unless the sales contract specifies something wider. A buyer who assumes CIF means “fully insured” is often wrong.
Who is responsible for buying it
Responsibility for cargo insurance follows the Incoterm, not habit:
- Under EXW, FCA or FOB, the seller has no obligation to insure the goods at all — cover is entirely down to the buyer, from the point risk transfers.
- Under CIF and CIP, the seller must buy insurance, but only to the minimum level (ICC C) unless the buyer has negotiated more.
- Under CFR and CPT, the seller pays freight but has no insurance obligation whatsoever — a term that catches out buyers who assume “cost and freight” includes cover.
The practical failure point is a mismatch in assumptions: the manufacturer ships FOB thinking the buyer’s forwarder has it covered, the buyer thinks the exporter’s cargo insurance applies, and the goods travel uninsured. This is worth confirming in writing before the first shipment, not after a claim.
What voids a claim in practice
Insurers and their surveyors look for reasons to decline before they look for reasons to pay. The recurring ones on this trade lane:
- Packaging judged inadequate for the voyage and for tropical humidity and handling conditions — this shifts blame from “peril of the sea” to inherent vice or poor packing, both commonly excluded.
- Cover that runs port-to-port rather than warehouse-to-warehouse, leaving the inland leg at destination — often the roughest part of the journey — outside the policy.
- Late notification. Most policies require the loss to be reported within a short window of discovery, not whenever it’s convenient to file the paperwork.
- Insured value that doesn’t match the commercial invoice, which gives the insurer grounds to query the whole claim.
Documents you need to make a claim
A claim moves faster, and gets taken seriously, when the paperwork is already consistent. The insurer will ask for the original policy or insurance certificate, the commercial invoice, the packing list, the bill of lading, and a survey or damage report raised at the point the loss was discovered — ideally by an independent surveyor, not just a note from the consignee. These sit alongside the rest of the export documentation a shipment already needs, which is why it pays to keep that file complete and consistent from the start rather than reconstructing it after something has gone wrong.
Before you ship
A few checks before the first container moves save most of the disputes that come up later:
- Confirm which Incoterm applies and who is contractually obliged to buy cargo insurance — don’t assume it from the payment terms.
- If the default is ICC (C), decide whether to negotiate ICC (A) cover, particularly for goods sensitive to handling or moisture.
- Check the policy runs warehouse-to-warehouse, including the inland leg at the destination port, not just ocean carriage.
- Make sure the insured value matches the invoice value the buyer will actually use — ask what the buyer expects rather than guessing a standard margin.
- If payment is by letter of credit, confirm the bank’s required insurance certificate wording before shipment, since banks routinely reject documents that don’t match the credit exactly.
None of this is complicated once it’s written down. The problem is that cargo insurance tends to get treated as a box to tick on the Incoterm rather than a policy someone has actually read — and that only becomes visible the first time something goes wrong at sea.
Leave a Reply