Finagle’s Law,
a popular version of Murphy’s Law, which says that “Anything that can go
wrong, will”, is probably the best way to explain the importance and
necessity of freight and cargo insurance. A few recent examples
of accidents or incidents which resulted in huge cargo or marine claims are:<ul><li>The&nbsp;<a href="https://en.wikipedia.org/wiki/2015_Tianjin_explosions" style="letter-spacing: -0.02em; background-color: rgb(255, 255, 255);">Tanjin Port explosion</a>&nbsp;(2015) caused due to hazardous cargo could result in a loss of USD 6
billion. </li><li><a href="https://www.theguardian.com/business/2016/sep/02/hanjin-shipping-bankruptcy-causes-turmoil-in-global-sea-freight" style="letter-spacing: -0.02em; background-color: rgb(255, 255, 255);">Bankruptcy declaration of Hanjin Shipping</a> in September 2016 resulted in
huge cargo claims. </li></ul>Natural
calamities like earthquakes, floods, and hurricanes also form a major
part of marine claims.While all
transportation and allied service providers aim to provide safe transport of
goods from one place to another, the possibility of damage, loss, or delay
still remains. Damage or loss to cargo can be either due to natural causes or due to
breakdown of or accidents on the transportation vehicle (train, truck,
airplane, ship).A good cargo
insurance, to an extent, helps protect the shipper against all the things that
can possibly go wrong during transportation. It helps minimise risks and losses due to accidents, natural calamities, and damages during transportation.
It works as a shipper's lifeline till the goods reach the designated destination
and are handed over to the specified recipient as per the Bill of Lading.<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a>Of course, this
protection comes at a cost and only if the shippers have acted in good faith and
have been prudent!However,
choosing a marine insurance cover is easier said than done. There are quite a
few combinations to choose from and too much fine print to read and understand. But, if a shipper keeps the following points in mind, then it becomes slightly
easier to choose a good cargo insurance policy.Sale
Agreement:&nbsp;The sale agreement plays a major part in deciding which party to the
sale is in charge of getting the cargo insured. In sale agreements where the
seller is responsible only for paying for the cost and freight (C&amp;F) or if he is responsible only for transporting the
cargo till the port of loading (FOB), then the onus of getting the cargo insured lies
with the importer/buyer. In cases where the sale agreement is cost, insurance,
and freight (CIF), then the responsibility of getting the marine
insurance cover rests with the exporter/seller.This point is
important as it determines which party to the transaction will be responsible for
arranging the insurance cover and how the claim process will be handled in case
of any damage or loss. Risks
Covered:&nbsp;The kind of risks and the extent of coverage is the one of the most
important points to consider when selecting a cargo insurance policy. The shipper should gauge the kind of risks that he may have to deal with and then
accordingly purchase an insurance policy that will help cover those risks. Frequency of
Trade:&nbsp;This is another aspect that can influence the choice of marine insurance
cover selected. If it is a one-time consignment, then the shipper can consider a
policy for that specific shipment only. If he has regular shipments, then he
can go for an open policy or an open cover.Arrangement
with Freight Forwarder:&nbsp;Though shippers are always advised to take
a policy for their own shipments, they can also check with their freight forwarder
for insurance cover options. Here, the coverage might be lower than what they would get if they bought their own cargo insurance policy, and
hence may not be sufficient to cover the losses in case a claim arises.Multi-modal
Transportation and Storage:&nbsp;If the transit requires multi-modal transportation,
then while choosing a cargo insurance policy, the shipper must also confirm and
check that the goods will be covered in all modes of transportation – rail, road,
air, and sea and while in storage during the transit time period.Assess Add-ons
Required:&nbsp;There are certain risks that may not form a part of the insurance policy
and may need to be covered separately. The party in charge of arranging for the
insurance cover must assess all the possible risks involved during transit and
the time in between with respect to location, transhipments, storage, and
political conditions of the countries involved in the trade. For example, if
one of the countries involved in the trade is going through riots or strikes
and the region falls on the route of the transportation – then it would be
prudent to get a cover against this specific problem. It may increase the
premium payable, but it will ensure that if the cargo suffers any damage due to
an unstable environment, the losses will be covered.<img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-2.png" alt="" width="300px">Once there is
clarity on the above points, and the shipper has all the required information,
he can select from one of the following policies (most common types of cargo
insurance available in India) to insure his cargo. Specific Voyage
Policy: This
policy covers only one specific shipment. It is applicable only till the time
the shipment reaches the specified destination. As mentioned earlier, it is
ideal for shippers who do not export/import goods regularly.Open
Cover:&nbsp;Generally, a yearly cover is offered by the insurer to the shipper with
an understanding that the insurer will provide marine insurance (separate
policies) to both import and export shipments. Under this cover, a separate policy
for each consignment is created and a premium is collected for that specific
shipment.Open
Policy:&nbsp;This insurance policy is not applicable for international
transportation. It can only be taken by shippers who are transporting goods
within the country. It is generally an annual policy and covers movement of
cargo declared during the policy period.Annual
Policy:&nbsp;This type of policy is applicable only for goods being stored or shipped
from a specific place and where the title of goods belongs to the shipper (exporter/importer) who has taken the policy.While insurance
provides a safety net for the shipment, it comes with a set of rules that need
to be followed. If there is any instance of negligence from the insured, then
the insurance policy can be declared to be void.Shippers need to keep the following points in mind to get maximum benefit from their
insurance policies:<ul><li>Provide the correct details of the shipment with respect
to weight (net and gross), number of packages, nature (perishable, hazardous or
dangerous cargo). </li><li>Provide the correct details of the final destination and
the end recipient of the cargo. </li><li>Insure that the packaging of the cargo has been done
keeping trade guidelines and safety of the product in mind. </li><li>Insure that all the required labels and markings have
been put on the package. </li><li>Insure that all additional handling instructions have
been provided to the carrier and its agents. </li><li>Any other information that may have an effect on the
insurer’s decision to insure the cargo and give the insurer’s ability to
understand the kind of and extent of risk they are undertaking by insuring the
cargo. </li></ul>It is important to note that all
marine insurance claims are verified with the information provided at the time
of taking the cargo insurance.

Cargo Insurance: A Safety Net For Sailing

When it comes to feeding the global demand for manufactured goods, China is the leader of the pack. <a href="https://chinapower.csis.org/much-trade-transits-south-china-sea/" target="_blank">Sixty percent of the country’s trade in value</a> travels by sea. Transporting goods by sea - it goes without saying - is risky. Accidents, bad weather, and other circumstances beyond your control can lead to your valuable cargo being damaged or lost. The only protection against losing your goods to the perils of the sea is marine cargo insurance. Really, there is no good reason not to insure your cargo. In this piece, we discuss the importance of cargo insurance for your China shipments, how much it costs, and where to buy it from. <a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a><h3>What is marine cargo insurance? </h3>Marine cargo insurance covers the loss of or physical damage to goods while in transit by sea. Your cargo is covered against losses or damage (partial or total) caused by: <ul><li>Natural disasters such as storms and earthquakes </li><li>Theft, hijacking, piracy, and violence </li></ul><ul><li>Vessel disasters such as sinking, stranding, and collision </li><li>Accidents during loading and unloading </li><li>Spillage from other containers </li><li>Marine cargo insurance also covers expenses such as forwarding charges, survey fees, and reconditioning fees &nbsp;</li></ul>Note: Forwarding charges kick in when the journey is aborted and the cargo has to be forwarded to its intended destination. A survey fee is paid to a marine surveyor for inspection of the insured cargo. A reconditioning fee is paid to repair or recondition damaged cargo. &nbsp; &nbsp; &nbsp; &nbsp;Marine cargo insurance doesn’t cover losses or damage caused by: <ul><li>Inappropriate packaging, negligence, misconduct, and delay </li><li>Inherent vice (damage to the goods due to their inherent nature, such as iron rusting and food spoiling) </li><li>Cargo abandonment </li><li>Rejection by customs </li></ul><ul><li>Failure to pay or bankruptcy of the cargo owner </li><li>Use of weapons </li><li>War, strikes, riots, and civil commotions </li></ul>What are the top China ports driving global trade? Click<a href="https://www.cogoport.com/blogs/china-ports-driving-global-trade-and-growth" target="_blank"> here</a> to find out <figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><a href="https://app.cogoport.com/en-IN/?utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-3.png" width="auto" style="width: auto; height: auto;"></a></figure><h3>Why buy cargo insurance for your China shipment </h3>When shipping to and from China, these are the main reasons why your cargo is safer with insurance than without: &nbsp;<ol start="1"><li>High incidence of cargo loss: Recently, accidents involving shipments from China are on the rise. In the past year, there has been a worrying pattern of containers stacked precariously high on over-crowded ships falling into the sea. More than 3,000 containers were lost at sea in 2020 while the number for this year stands at over 1,000. This is the biggest jump in container losses in seven years. It’s also millions of dollars worth of cargo damaged or lost forever. Bloomberg estimates more than<a href="https://www.supplychainbrain.com/articles/33002-shipping-containers-are-falling-overboard-at-a-rapid-rate" target="_blank"> $150 million in losses for 2020</a> and<a href="https://www.supplychainbrain.com/articles/33002-shipping-containers-are-falling-overboard-at-a-rapid-rate" target="_blank"> $54.5 million</a> for this year so far. Most of these incidents took place in the Pacific Ocean, one of the busiest shipping routes connecting suppliers in Asia with consumers in North America. A big chunk of the containers lost were on board ships sailing from China. Earlier this year, the<a href="https://theloadstar.com/maersk-essen-loses-750-boxes-into-the-pacific/" target="_blank"> Maersk Essen</a> and Maersk Eindhoven were both en route from Xiamen to Los Angeles when they encountered bad weather. The Essen lost 750 containers in January and the Eindhoven 260 containers in February. </li></ol><ol start="2"><li>Natural disaster zone: China has one of the<a href="https://www.swissre.com/dam/jcr:eb1aba5f-05ca-4bd4-bfe6-d42a6ed6b8c5/150Y_Markt_Broschuere_China_Inhalt.pdf" target="_blank"> highest frequencies</a> of earthquakes, floods, and typhoons. According to CGTN, a cable TV news service run by China’s state media, the country is currently exposed to<a href="https://news.cgtn.com/news/2021-05-18/China-to-launch-comprehensive-survey-on-natural-disasters-10mBdT1xX4Q/index.html" target="_blank"> 22 types of natural disasters</a>, including ocean disasters such as thunderstorms, typhoons, cyclones, and storm surges. This is all the more reason to insure your China cargo as it makes the long journey by sea to your shores. In 2017, a<a href="https://shipsandports.com.ng/chinese-cargo-ship-sinks-12-crew-rescued/" target="_blank"> freight ship sank</a> off the coast of Guangdong province when its cargo shifted due to high waves and strong winds caused by Typhoon Roke. In December 2020, a Chinese bulk carrier carrying 4,700 tonnes of cement sank in the South China Sea after encountering strong waves, which caused its cargo hold to flood. Both incidents resulted in significant cargo loss. Over just three days in July 2021, China has received its <a href="https://www.reuters.com/world/china/heavy-rainfall-kills-12-central-chinas-henan-provincial-capital-xinhua-2021-07-20/" target="_blank">heaviest rainfall in a thousand years</a>, leading to unprecedented flooding in Henan, a major logistics hub, and endangering transportation operations as well as people and property. China watchers say the intensity and frequency of natural disasters will only increase with climate change. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </li></ol><ol start="3"><li>Peak season risks: When shipping goods to and from China, traders must keep peak season in mind. This is the time cargo volumes entering and exiting China surge dramatically, leading to a jostle for space on carriers and a huge spike in cargo handling operations at ports and warehouses. As this is arguably the busiest time of the year for cargo handlers, accidents and oversights can happen, resulting in lost and damaged goods. With cargo insurance, you can remain calm through this chaotic period. Peak season comes every year and extends from August to November, in the run-up to the Christmas and New Year holidays. Peak season in 2020 was particularly busy. As the world slowly recovered from the first wave of Covid-19, cargo traffic from China to the US and Europe<a href="https://www.freightwaves.com/news/port-of-long-beach-again-breaks-container-record" target="_blank"> broke all records</a> as businesses started restocking inventory, anticipating a rush of holiday shoppers. So strong was the demand for goods from Asia, particularly China, that the peak season spilled over into 2021. Apart from peak season, there are other dates and periods in the Chinese calendar that importers and exporters must pay attention to. The first is a mini peak season in January and February that comes ahead of the week-long Lunar New Year holidays in China. The second is Golden Week in October, when the Chinese celebrate National Day, again with a week-long break from work. Both periods are associated with a significant rise in cargo traffic from China and severe logistics headaches for everyone involved in the shipping industry. &nbsp; &nbsp;</li></ol><figure class="w-richtext-figure-type-image w-richtext-align-center" data-rt-type="image" data-rt-align="center"><div><img src="https://uploads-ssl.webflow.com/5e57ba59552cf400c593fd16/60fe48e693b32e370fec76d0_container-2380546_640.jpg" loading="lazy" width="auto" height="auto" alt="Containers stacked precariously high on carriers are a common sight in Asia, especially China"></div><figcaption>Containers stacked precariously high on carriers are a common sight in Asia, especially China (Image by Erich Westendarp from Pixabay)</figcaption></figure>&nbsp; <a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 2.png" width="auto" style="width: auto; height: auto;"></a>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <h3>How much does marine cargo insurance cost? </h3>Marine cargo insurance is generally affordable. According to Steve Fodor, Director of the US-based Association for Trade Compliance, cargo insurance costs<a href="https://www.hellenicshippingnews.com/shippers-urged-to-take-another-look-at-cargo-insurance/" target="_blank"> less than half a percent of the shipment value</a>. So, it makes little sense to cut back on it to save on shipping costs. How do you calculate the insurance amount and premium? There’s a simple formula used by insurance companies across the world, including in China. &nbsp;First, you need to know the ‘insured value’ of the consignment. Usually, insured value is CIF plus 10 percent, or 110 percent of CIF. The<a href="https://www.cogoport.com/blogs/incoterms-2020" target="_blank"> CIF Incoterm</a> stands for Cost, Insurance, and Freight. The additional 10 percent covers incidental costs in case of cargo loss, such as the fee for processing the insurance claim. Therefore: &nbsp;Insured value = CIF + 10% The insured value is the maximum amount the insurance company is liable for in the event of cargo loss or damage covered under the insurance policy. The premium you pay is a percentage of the insured value specified by the insurance company. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; To know about incidental charges related to buying marine cargo insurance, click<a href="https://www.cogoport.com/blogs/incidental-shipping-charges-part-ii-transport-insurance-related-extra-costs" target="_blank"> here</a> &nbsp; <h3>Where to get cargo insurance in China </h3><ul><li>From your freight forwarder: If you have a freight forwarder handling your China shipments, you can ask them to get your cargo insured as well. In fact, a diligent forwarder will always make sure your goods have adequate insurance cover while in transit. Most forwarders in China have ties with insurance firms, brokers, and agents. They offer a wide range of cargo insurance products, including ‘All Risk’ policies that offer the most comprehensive risk cover. China has a booming cargo insurance market with its hub in <a href="https://www.swissre.com/dam/jcr:4e236d6d-8142-441a-b682-ba9f0a8580ae/chinese_ins_market_feb2018_en.pdf" target="_blank">Shanghai</a>, which is also home to the<a href="https://www.seatrade-maritime.com/ports-logistics/shanghai-port-retains-crown-worlds-busiest-container-port-2020" target="_blank"> world’s busiest container port</a>. Thanks to generous state support, marine insurance policies issued in Shanghai are<a href="https://www.swissre.com/dam/jcr:4e236d6d-8142-441a-b682-ba9f0a8580ae/chinese_ins_market_feb2018_en.pdf" target="_blank"> exempt</a> from many local taxes and surcharges. With the right freight forwarder working for you, you can avail of these cost-saving benefits while getting your cargo insured. Additionally, you can try out Cogoport’s <a href="https://www.cogoport.com/" target="_blank">end-to-end shipping services</a>, which will take care of everything from your freight and local transport to documentation, customs, insurance, and more.<a href="https://www.cogoport.com/signup" target="_blank"> Sign up</a> and speak with our in-house experts to find out what’s on offer. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</li></ul>Read our guide to finding a freight forwarder in China<a href="https://www.cogoport.com/blogs/how-to-find-select-a-freight-forwarder-in-china-asian-countries" target="_blank"> here</a> &nbsp;<ul><li>From an insurance company: Shippers also have the option of buying an insurance policy for their cargo directly from an insurance firm. If you’re buying cargo insurance in China, you can choose from well-known global insurers who have their offices in the country as well as established domestic companies. Ping An Insurance and the state-owned<a href="https://www.prnewswire.com/news-releases/peoples-insurance-company-of-china-picc-one-of-the-largest-insurers-globally-with-126-billion-total-assets-is-opting-to-embrace-blockchain-technology-with-the-help-of-dnv-gl-and-vechain-300705596.html" target="_blank"> People’s Insurance Company of China</a> are two of the most recognised home-grown insurers. </li><li>From the carrier: Like freight forwarders, major shipping lines offer marine cargo insurance in partnership with well-known international insurers. For example, Maersk has partnered with Zurich Insurance while Hapag-Lloyd has a tie-up with Chubb (for some countries). &nbsp; &nbsp; &nbsp; </li></ul><h3>Insurance certificate and its importance </h3>Most trade experts say an insurance certificate is a must-have document when importing from China. The insurance certificate captures the main points of the marine cargo insurance policy in a single document. It acts as proof that a particular consignment is insured. It is issued by the insurer or insurance broker. In China (or anywhere else where it is required), the insurance certificate is an important document that must be presented during customs clearance. Because it allows for faster access to information regarding the shipment’s insurance status, it hastens the customs clearance process. &nbsp;In an insurance certificate, you’ll find the following details: <ul><li>Name of the policy holder </li><li>Policy number </li></ul><ul><li>Policy validity period </li><li>Policy limit, or the maximum amount of compensation allowed </li><li>Insurance premium amount </li><li>Details of the shipment, such as description of the goods, vessel name, ports of origin and destination &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </li></ul>Click<a href="https://www.cogoport.com/blogs/best-practices-for-efficient-communication-with-your-chinese-supplier" target="_blank"> here</a> to know how to effectively communicate with your Chinese supplier

Why Marine Cargo Insurance for China Shipments ?

Cargo, when transported around the world is faced with many risks, regardless of the shape and size. Be it the weather or human error, cargo loss is revenue lost for exporters and importers. This is where marine insurance will be crucial. Marine insurance will typically insure losses against physical damage to cargo on the move or in storage.<a href="https://api.whatsapp.com/message/N4CI7UNDFE2ZM1?autoload=1&amp;app_absent=0&amp;utm_source=web&amp;utm_medium=blog&amp;utm_campaign=general" target="_blank"><img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog Banner WA 3.png" width="auto" style="width: auto; height: auto;"></a>
But what is marine insurance exactly?

In many ways similar to regular insurance, marine insurance is designed to meet the needs of the shipping industry. It helps to protect against loss or damage of cargo including the cost of moving it, or liability to a third party occurring during a shipment. It can be extended to cover losses on inland transport either by inland waters, road or rail.

How will marine insurance offer protection for your cargo?

Marine insurance policies tend to cover commonly defined packages. If you are looking for a fully comprehensive cover you may need what is called “Institute Cargo Clause (All Risks) – ICC (A)” which pretty well covers every risk you’re like to encounter. The alternative is to look for a plan that lists out specific risks that will be covered.

And these come in two main varieties.

ICC (B) covers a long list of named risks or perils such as fire, ship loss, unloading in the wrong place when your ship gets into trouble and the usual natural phenomenon such as earthquakes and volcanic eruptions.<img src="https://cdn.cogoport.io/cms-prod/cogo_public/vault/original/Blog-Banner-Portal-2.png" alt="" width="300px">You would also likely be covered for things such as water getting into your cargo or your contained being lost at sea for whatever reason.

The third, and simplest cover, - ICC(C) focuses on disasters such as explosions, fires, lost ships or jettisoned the cargo.

There will be times when different levels of cover seem appropriate and you will be able to decide what works for you on any given consignment. Importantly, a shipper and consignees need to be very aware on a case by case basis what level of cover they have brought as there are considerable differences between the policies that are on sale.

Obviously the policy will include the full terms that govern your contract but you may want to check the exact meaning of terms such as General Average - is a useful [website](http://www.duhaime.org/LegalDictionary/Category/MaritimeLawDictionary.aspx) &nbsp;full of maritime legal terms.

With the right insurance protection, not only will your cargo be well protected, your investment in your cargo, and protection will be well rewarded.

In the event that your shipment is lost, marine covers ensure that you do not lose out completely on the revenue you would have earned through the lost cargo. Moreover, you will have peace of mind, knowing that your cargo is well protected in the event of any eventuality that could occur.

So check out the insurance being offered by providers on the Cogoport’s platform and enjoy the protection of your shipment with ease.

Looking to sign up with Cogoport’s service?

Osiguranje tereta

Zaštitite svoju robu, zaštitite svoje poslovanje!

590

Pokrivenost za sve vaše potrebe prijevoza, zajamčeno!

Potpuna zaštita za vaš potpuni mir - pokriveno svim rizicima

Ne dopustite da vaša pošiljka potopi vašu dobit

Brzo. Digitalni. Zaštićena.

Mir uma, isporučen

trustedBy

trustedBy_smeExporter

Blogovi

Trade & Industry Advisory

Cargo Insurance: A Safety Net For Sailing

29 April 2020

Trade Advisory

Why Marine Cargo Insurance for China Shipments ?

02 August 2021

Industry Basics

Marine Insurance 101: Everything You Need to Know

31 May 2021