1. International insurance

2. Marine insurance policies: An international trading firm-exporter or importer- intent on transferring all or part its international shipping risk is generally only interested in purchasing marine cargo insurance since it just needs to protect itself from damage to the cargo as well as from its liability toward the ship owners and the rest of the cargo in a general average case. 1. Marine cargo insurance: This insurance can be purchased either under an open ocean cargo policy or under a special cargo policy:

3. Open policy: An open policy is an insurance contract with which a firm insures every international shipment it makes for a fixed period of time. Such a policy if formally known as an Open Ocean cargo policy and it automatically covers all the shipment of the insured, as long as the firm reports every shipment to the insurance company. Special cargo policy: The second alternative is to purchase an individual policy called a special cargo policy for each of its shipments. This alternative allows a firm to specifically purchase coverage that pertains best to a shipment.

4. Obtaining insurance certificates: On large number of occasions, the exporter is requested to provide a certificate of insurance to the importer and its bank usually as this certificate is required by the letter of credit. Under the open ocean cargo policy however this requirement used to present some difficulties until recently. However, this certificate did not specifically address the insurance status of a given shipment and some banks did not accept evidence of an open policy as a proof of insurance required in the terms of the Letter of credit.

5. Purchasing marine cargo insurance: Marine cargo insurance can be purchased from two sources: i.) An insurance agent can assist the firm in obtaining the most appropriate coverage given its product mix an its risk management strategy. ii.) A freight forwarder who can provide generic coverage for a given shipment almost immediately; as such, freight forwarders sell a lot of special cargo policies.

6. 2. Hull insurance: It is contracted by the ship owners to cover the risk of damage to their ship when it is involved in a peril such as grounding or fire. It also covers the owner of a complete loss, such as a sinking. This policy also covers the owner’s liability toward the cargo owners in the case of a Average and its damages in the event of a collision with another ship.

7. 3. Protection and indemnity: It is a protection and indemnity is yet another form of insurance for a ship owner it is a protection against liability to other parties when ship sinks or is damaged. In the last few decades, it has meant liability for oil spills – specifically cargo spills but also ship fuel spills – on beaches and their extensive clean-up costs. However, is also includes the ship owner’s liability toward the crew (injury, death) or in repatriating stowaways.

8. 4. Coverages under a marine cargo insurance policy: There are two major group of policies that can be purchased in order to protect cargo during an ocean or air shipment. The first group is governed by British Law and was completely rewritten in This group of insurance policies seems to have become the standard for other countries as well. They are known as the Institute Marine Cargo Clauses, Coverage A, B or C.

9. The second group is older, with some antiquated clauses and more modern ones and is mostly written by U.S-based insurance companies although some of the coverage can be written using older British clauses.
These traditional policies are known as ‘All risks, ‘general average’ an ‘free of particular average’.
The five specific risks not covered by none of the policies are,
i.) The improper packing ii.) Inherent vice
iii.) Ordinary leakage iv.) Unseaworthy vessel
v.) Nuclear war

10. i.) Improper packing: The goods must be adequately packed for an ocean voyage and be well protected against shocks and water damage as well as well secured in the container or the crate. ii.) Inherent vice: The goods shipped have natural propensity to be affected in a certain way. For example steel will exhibit surface rust after being exposed for some time to air and moisture, agricultural product shipments will foster insect and rodents and woods will warp and split. None of these ‘inherent vices’ are insurable.

11. iii.) Ordinary leakage: Also known as ‘ordinary loss in weight and volume’ and ‘Ordinary wear and tear’, this states that several products, when shipped will leak or lose weight; for example an agricultural product, such as wool, will lose some weight as it moisture content decreases; petroleum oil transported in bulk will partially evaporate; and an automobile carried on a roll on/roll –off ship will show additional mileage. None of these risks are insurable.

12. iv.) Unseaworthy vessel: This exclusion is not a problem for goods shipped by regularly scheduled container or break-bulk ships; however it puts a burden of care on the shipper in the case of a shipment going by bulk ship, as the shipper must make certain that the ship is classified by a classified by a classification Society as seaworthy.

13. v.) Nuclear war: This risk is always specifically excluded from policies. Note that the risk not covered is the direct result of nuclear war, such as irradiation or destruction. However, should a shipment be damaged by a fire caused by nuclear war, the shipment is covered- if the risk of fire is covered in the policy-because the fire was the peril that caused the loss.

14. Institute marine cargo clauses-coverage A
The first general policy is referred to as Coverage A of the institute of Marine Cargo Clauses. Coverage A is quite similar to a traditional ‘All risks’ policy in that it covers ‘all risks of loss or damage to the subject-matter insured‘.
Coverage A is not an all risk policy as it covers all perils except the ones mentioned earlier(improper packing, inherent v, ordinary leakage, unseaworthy vessel and nuclear war) as well as a number of risks for which specific additional coverage must be purchased separately as endorsements to the main policy.

15. All risk coverage:
An ‘All risk policy’ is an older – particularly in the United States-type of policy,
Since an All risks policy can be written as an American contract or as a British contract, it will contain different wordings of the clauses and other relatively minor changes which will make an American policy different from a British policy on a few points.
For US All risk policy, the goods have to be shipped ‘under deck’ which means that the goods must be stowed inside he ship for the obvious reason that goods inside a ship are exposed to fewer perils than goods stowed on deck.

16. Institute Marine Cargo Clauses – Coverage B
Another general policy is referred to as Coverage B of the Institute Marine Cargo Clauses. It is also called ‘named perils’ policy as it lists specifically the risks that it will cover.
The list of covered perils includes fire, stranding, sinking, collision, jettison, washing overboard, water damages and total losses during loading and unloading.
However, losses due to bad weather are not covered and neither are partial losses happening during loading and unloading of the ship.

17. Institute marine cargo clauses – Coverage C
This is also a ‘named perils’ policy as it lists specifically the risks that it will cover.
The list of covered perils is limited to fire, stranding, sinking, collision and jettison; it does not include washing overboard, rough weather damages, water damages and losses during loading and unloading.
Coverage C is the minimal enough as to be inappropriate for most goods and companies doing business on CIF or CIP term should definitely extend this coverage to ‘maximum Cover’.

18. With Average Coverage:
The ‘ with average’ policy is generally written to include coverage in between an ‘ All risks’ policy and a policy with Coverage B of the Institute Marine Cargo Clauses. A with Average policy is also named a ‘named perils’ policy as it lists specifically the risks that it will cover.
A with Average policy covers risks such as fire, explosion, stranding, collision, and so on but covers damage to cargo from heavy weather as well partial losses while loading and unloading the vessel and the bursting of boilers, none of which Coverage B provides.

19. Free of particular average coverage:
This is policy which will cover total losses but will only cover partial losses in some circumstances.
The major issue is whether the policy is a ‘ free of particular Average-English conditions policy or a ‘free of particular average- American conditions’ policy.
Under American conditions policy, partial losses are covered only if they result directly from a fire, stranding, a sinking, or a collision occurs without these perils having directly caused the loss.

20. Strikes Coverage:
All the previous standard policies include a clause called the ‘ strikes, Riots and Civil Commotions’ clause in the American policies and the ‘Strikes exclusion’ clause in the Institute Marine Cargo Policies which excludes coverage of damage to strikes and other civil disturbances.

21. War and seizure Coverage:
All the previous standard policies also include a clause called the ‘ free of capture and seizure’ (F.C & S.) clause in the Institute Marine cargo policies which excludes coverage of damage to cargo due to war and war-like situations such as the seizure of a ship by a foreign government or the accidental collision of a ship with a mine.
The shipper can insure against war damages but it is through an additional policy called the ‘war risks only’ policy which cover hostile acts by a foreign government or by an organized power.

22. Warehouse-to-warehouse coverage:
This covers the goods from the time they leave the exporter’s warehouse until the time they arrive at the importer’s warehouse or fifteen days after they arrive in the port of destination whichever occurs first.
The All risks and with average insurance policies added a ‘shore perils’ endorsement to include the perils occurring while loading and unloading ships; this clause was also made part of the Institute Marine Cargo Clauses.
A true warehouse-to –warehouse clause was added to most open cargo policies.

23. Difference in conditions:
It is designed to fill the gap between what an importer would like to have covered under its open cargo policy and what is covered under its supplier’s CIF or CIP coverage.

24. Commercial insurance credit:
competitive pressure are pushing firms to sell on an ‘open account’ basis as customers try to acquire the best possible payment alternative . Several countries used to offer subsidized term on export insurance to their exporters and although these practices have officially ended with the creation of the world trade organization(WTO) which prohibits export subsidies, the mindset was established.

25. Risk involved:
There are two components to the risk of non-payment.
Political risk:
This is the risk presented by the country in which the transaction takes place. This risk cam take many forms.
The country’s government can decide to increase tariffs on certain imports and the customer refuses delivery, the country’s government can decide to freeze accounts held in foreign currencies and the customer can not pay the country’s government can commit a political faux pas and an embargo is declared.

26. Commercial risk: This is the risk presented by the customer defaulting on its obligation to pay for whatever reason. Generally, the customer encounters financial difficulties or the customer has a complaint about the product which it cannot resolve any other way-in its management’s mine, at least than by withholding payment to the exporter. Risk management alternatives: Three alternatives available to manage them. It can decide to retain the risk, it can decide to transfer the risk to an insurance company or it can follow a mixed strategy.

27. Insurance policies available:
Insurance can be obtained from a large number of insurance companies and governmental or quasi-governmental agencies.
Most of these sources have multiple programs presenting a dizzying array of possible contracts.
Most companies Interested in such programs should contact an insurance agency specializing in these types of policies as well as contact their banks or governmental export support agencies in their country for further and more specific information.