Marine Cargo Insurance
How goods in international transit are insured: what marine cargo insurance covers, how the Incoterm decides who arranges it, the 110% of CIF convention, certificates of insurance, and the principles of proximate cause and subrogation.
What it is
Marine cargo insurance covers physical loss of or damage to goods carried internationally by sea, air or multimodal transport. It protects exporters, importers and traders against perils of transit such as fire, sinking, stranding, collision and jettison. Depending on the clause chosen, it may also cover heavy-weather damage, theft and piracy.
In India these contracts are governed by the Marine Insurance Act, 1963, which is modelled on the UK Marine Insurance Act, 1906. The scope of cover in a particular policy is set by the Institute Cargo Clauses it carries: (A), (B) or (C).
Who arranges the insurance
The sale contract usually settles this through its Incoterm (International Commercial Term). Under CIF, which stands for Cost, Insurance and Freight, the seller must arrange and pay for cargo insurance, for the buyer's benefit, to the destination port. Under EXW, FCA and FOB neither party is obliged to insure; the buyer carries the transit risk and usually arranges cover.
Under Incoterms 2020 a CIF seller must insure to at least ICC (C), while a CIP seller must insure to ICC (A). A buyer or a bank may ask for something wider, and a letter of credit sets out whatever it requires.
How much, and the certificate
By convention the sum insured is 110% of the CIF value. The extra 10% stands in for the buyer's expected profit on the goods. The same 110% is the minimum cover required under Incoterms 2020 CIF and CIP, and under UCP 600 for letters of credit. A higher uplift can be agreed with the insurer.
A trader with regular shipments usually holds an open policy. For each consignment under it the insurer issues a certificate of insurance, which is proof that the specific shipment is insured. Banks require it in letter of credit transactions.
What the widest cover still leaves out
ICC (A) is all-risks cover: everything is covered except the exclusions it lists, such as wilful misconduct, inherent vice, ordinary leakage, war and strikes. ICC (C) is the most basic set and does not cover washing overboard, earthquake, volcanic eruption or entry of water; washing overboard is covered under ICC (B) and ICC (A).
Inherent vice means the goods deteriorate because of their own nature, with no outside accident: fruit ripening and rotting, damp grain heating spontaneously, chemicals reacting on their own. It is excluded under all three clauses, because insurance responds to accidents and not to the certain behaviour of the goods.
Two principles that decide claims
Proximate cause: cover turns on the dominant, effective cause of the loss. That is not necessarily the last event in time, and it is not a remote one either. If the dominant cause is an insured peril the loss is covered; if it is an excluded one, it is not.
Subrogation: after paying a claim the insurer steps into the shoes of the insured and can pursue recovery from the party responsible, such as the shipping line, port authority or carrier. The insured is indemnified once, and the party at fault ultimately bears the loss.
Rules at a glance
Illustration: finding the proximate cause
Anjali imports machine parts under a policy on ICC (A). During the voyage a fire breaks out in the hold; the crew put it out with water, and the water rusts her parts. The last thing to happen was wetting, but the dominant, effective cause of the damage was the fire, which is an insured peril.
Change the facts: a cargo of fruit simply over-ripens on a voyage that ran to schedule, with no outside accident. The dominant cause is the nature of the fruit itself. That is inherent vice, which is excluded under every clause.
Sum insured on the 110% convention
- Assumptions of the example: cost of goods ₹50,00,000; freight ₹3,00,000; insurance premium ₹20,000.
- CIF value: ₹50,00,000 + ₹3,00,000 + ₹20,000 = ₹53,20,000.
- 10% of ₹53,20,000 = ₹5,32,000.
- Sum insured: ₹53,20,000 + ₹5,32,000 = ₹58,52,000, which is 110% of the CIF value.
Result. On these assumed figures the shipment is insured for ₹58,52,000.
Key points
- Marine cargo insurance covers physical loss of or damage to goods in international transit by sea, air or multimodal transport.
- The Incoterm in the sale contract usually settles who arranges the cover; under CIF it is the seller.
- The customary sum insured is 110% of the CIF value, and a higher uplift can be agreed.
- A certificate of insurance evidences cover for one shipment under an open policy and is required by banks for letters of credit.
- Inherent vice is excluded under ICC (A), (B) and (C).
- Proximate cause looks to the dominant, effective cause; subrogation lets the insurer recover from the party responsible.
Common misunderstandings
- All risks does not mean every loss: ICC (A) still excludes wilful misconduct, inherent vice, ordinary leakage, war and strikes.
- The extra 10% is not over-insurance: it stands in for the buyer's expected profit and is the accepted convention.
- FOB does not make the seller insure the voyage: under EXW, FCA and FOB neither party is obliged to insure, and the buyer carries the transit risk.
Questions people ask
Is air cargo covered by marine cargo insurance?
Yes. Marine cargo insurance covers goods carried internationally by sea, air or multimodal transport.
What is the difference between a policy and a certificate of insurance?
The open policy is the standing contract covering all shipments in its period. The certificate is issued for one consignment under it and proves that shipment is insured.
Can the sum insured be more than 110% of CIF?
Yes. 110% is the convention and the minimum under Incoterms 2020 CIF and CIP and UCP 600; a higher uplift can be agreed with the insurer.
What this lesson relies on
- Marine Insurance Act, 1963
- Institute Cargo Clauses (A), (B) and (C), 1 January 2009
- Incoterms 2020
- UCP 600
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.