Marine Cargo Insurance

Marine adventures, not quite Capt Cook though…

Getting goods from A to B can be filled with all types of risks, Marine Cargo Insurance is designed to protect your goods against the hazards and exposures they may be confronted with on their journeys around the globe.

The Marine Insurance Act goes back to the early 20^th Century, 1906 to be exact, it intends to indemnify (that’s to provide an agreement to cover your goods) the person who has an insurable or financial interest in the goods being moved. It uses exciting words like Marine Adventure, conjuring up images of the days of Capt. Cook. Sadly, this is insurance, and seldom is it going to be exciting.

What is Insurable interest in a Marine Cargo Insurance Policy?

When you insure something, house, car, or goods on their way to another country,  you are not insuring the item itself, what is being insured is your financial interest in that item, as an example, you can’t insure your neighbour’s property unless the responsibility has transferred to you legally.

The Marine Act 1906 says all who have an insurable interest in the item or items can insure that interest on a marine policy. Without getting too complex, where the person stands to gain from the items being safely delivered there is an interest, if there is no interest in the item then that is considered gaming or wagering.

The Marine Act can be seen here https://www.legislation.gov.uk/ukpga/Edw7/6/41

What does a Marine Cargo Insurance Policy cover?

One would be forgiven for thinking that the Marine Act only covers goods whilst at sea, becoming an Act in 1906 most goods would no doubt have been moved by boat, things have moved on and these days insurance covers for goods being moved by Aircraft or Rail and other means including by Road are included.

Your goods might be finished items or parts being distributed to your customers premises , or imported goods destined for the UK or direct to a customer’s location in another country without touching the UK at all. Just because you might be in the UK doesn’t mean you have to personally handle the goods, they can be shipped from a manufacturer such as one in the Far East to your customer or fulfilment depot in say the USA, as an example if you sell on Amazon

Your goods are covered from leaving the point of origin, by road, rail, boat, or aircraft to their final destination.

What type of Marine Cargo insurance policies are available?

Typically an Annual Marine policy would be bought, this would cover all the transits both inbound and outbound through the duration of the policy year based on what information has been provided to the marine insurer about the methods and terms of movement and the types of goods.

Marine policies are available on a short-term basis to cover individual transits where you might only move goods on an occasional basis.

Stock stored temporarily.

Sometimes stock may arrive at your premises for onward distribution to your customers, where this is the case these can be covered on what is called a Stock Throughput Insurance policy, although it’s not generally intended to replace cover where your stockholding might be speculative.

Do Marine Cargo Insurance policies have exclusions?

Yes, like most insurance policies there are always going to be some exclusions, below are a few of the main ones.

Willful misconduct of the assured, Ordinary leakage, loss in weight or volume and wear and tear, Unsuitability of packaging, and Delay to name just a few

What perils does a marine insurance policy cover?

Marine Insurance policies usually have quite wide covers, such as natural disasters as well as piracy, theft, collision, sinking, etc.

Marine cover is provided on what is known as  “cargo clauses” each cargo clause states what is covered under the policy. Cargo clauses may be Clause A, Clause B, etc but Cargo Clause A is considered to be the widest cover.

What are INCOTERMS?

Incoterms stands for International Commercial Terms, these are terms of sale and are important as they define both the seller’s and the buyer’s responsibilities. There are many different types of terms used. Common terms are EXW, FOB, and CIF to name a few, there are many more.

EXW – Ex-Works – the seller expects the buyer to collect the goods/products from their premises on an agreed date, usually with transport arranged by the buyer.

FOB – Free On Board – This is where the seller agrees to arrange to get the goods on the boat only at an agreed port. FOB is by water only.

CIF – Cost Insurance & Freight – the seller will agree to pay all costs and transport to an agreed port, it’s the buyer’s responsibility then to arrange suitable cover to the destination. CIF is by water only.

Marine insurance is essential for receiving or sending goods around the world, it can be very cost-effective by having your own policy in force.