Marine Cargo Insurance: Protection That Pays for Itself at the First Incident
Sea transport is one of the safest modes of carriage measured in tonne-kilometres. Incidents do occur, however: containers are washed overboard in storms, cargo is damaged by condensation moisture, containers are dented during loading operations. Without insurance, the loss falls entirely on the party that bore the risk at the moment of the incident under the delivery terms (Incoterms). With insurance — it falls on the insurer.
Marine cargo insurance is governed by the Institute Cargo Clauses (ICC), in force since 1982 and recognised as the international standard. There are three coverage options — ICC (A), ICC (B) and ICC (C) — each offering a fundamentally different level of protection. Choosing the right policy and understanding who should arrange it under a specific delivery term is something Trans-Hope helps with when organising port forwarding services and multimodal transportation.
Three Types of Coverage: ICC (A), ICC (B), ICC (C)
ICC (C) — the minimum coverage required under the CIF delivery term: the seller must insure the cargo, but only to ICC (C) or equivalent. This protects against catastrophic but rare risks. Suitable only for very low-value cargo or goods resistant to damage (metal, stone).
ICC (B) — an intermediate option. Adds water-related and natural disaster risks. Suitable for most industrial goods in sound packaging.
ICC (A) — all risks coverage. Insures against any physical loss or damage to cargo, except for risks expressly excluded (wilful misconduct of the assured, nuclear risks, war — the last of which can be added by a separate clause). Recommended for most import shipments to Ukraine.
Who Pays for Insurance Under Different Delivery Terms
The answer follows directly from the Incoterms conditions:
- CIF — the seller pays for insurance, but only the minimum (ICC C). If you want ICC (A), pay the difference yourself.
- FOB, CFR, EXW, FCA — the buyer arranges and pays for insurance. Risk transfers at the moment of loading on board, and from that point you are unprotected without a policy.
- DAP, DDP — the seller bears the risk through to the delivery point and insures accordingly. But confirm: what coverage, for what amount.
The practical takeaway: when trading on FOB from China, insurance is always arranged by the Ukrainian importer or their freight forwarder. This is standard practice, and Trans-Hope includes the insurance option in its comprehensive shipment management service.
How to Calculate the Insured Amount
The insured amount is calculated using the formula recommended by FIATA and accepted in international practice:
Insured Amount = (CIF value of goods + 10%)
The additional 10% covers loss of profit: if the goods are damaged, you lose not only their value but also the costs of arranging the transaction, waiting time and missed sales. Example: goods cost $50,000 FOB, freight is $2,500, insurance $300. CIF = $52,800. Insured amount = $52,800 × 1.10 = $58,080.
The insurance premium (policy cost) is typically 0.1–0.5% of the insured amount under ICC (A). The specific rate depends on cargo type, route, mode of transport and the assured's loss history. For shipments through the ports of Chornomorsk or Odessa, the rate may be above average due to the War Risk Premium surcharge.
War Risk for the Ukrainian Route
Since 2022, shipments to Ukrainian ports have required a separate War Risk policy. Standard ICC (A), (B) and (C) policies do not cover damage from military action, mines or drone strikes. War Risk is insured under a separate clause — the Institute War Clauses.
The War Risk Premium for Ukraine is significantly higher than the standard rate and depends on the current situation: at its peak it reached 1–3% of cargo value, falling during periods of stabilisation. Not all insurers offer cover for cargo destined for Ukrainian ports — Trans-Hope works with companies that have dedicated programmes.
What to Do When a Claim Arises
The procedure to follow in the event of cargo damage or loss:
- Document the damage immediately — when damage is discovered during port collection, make a note in the terminal documents (exception clause) and take photographic evidence;
- Notify the insurer — within 24–48 hours of discovering the damage; the policy specifies the notification period;
- Commission a survey — the insurer appoints an independent surveyor to assess the damage. Do not begin unloading the damaged container before the surveyor arrives;
- Retain all documents — bill of lading, annotated bill of lading, CMR, terminal reports, invoices, photographs;
- File a claim against the carrier — in parallel with the insurance claim, you may bring a claim against the shipping line (time limit: one year from delivery date under the Hague Rules).
Insurance for Multimodal Shipments
For multimodal shipments (sea + road or sea + rail), it is essential that the policy covers the entire route, not just the sea leg. Standard ICC (A) extends to cargo on a «warehouse to warehouse» basis — meaning cover begins when goods leave the supplier's premises and ends when they are delivered to the consignee's warehouse, including all modes of transport. Make sure the full route is explicitly stated in the policy.
Is marine cargo insurance mandatory?
How does war risk differ from standard cargo insurance?
Who should insure the cargo under FOB from China?
Does insurance cover customs confiscation?
Trans-Hope includes cargo insurance as an option within its comprehensive shipment management service — ask about it when requesting a quote for port forwarding services or container shipping.
