International Cargo Insurance Guide for Exporters

1. What Is International Cargo Insurance?

Cargo insurance is a property insurance policy in which the goods in transit are the insured subject matter. It covers loss of or damage to the cargo during the insured transit caused by perils named in the policy, and the insurer pays compensation as agreed. It is fundamentally different from freight forwarder's liability insurance and carrier's liability insurance:

• Freight forwarder's liability insurance: covers the logistics provider's own liability for its own negligence;
• Cargo insurance: protects the cargo owner's goods directly. It does not distinguish between liable parties, and a claim can be opened as long as the loss falls within the insured perils. It is also one of the documents regularly required in letter-of-credit settlement.

Coverage can be matched to different modes of transport: ocean freight, air freight, international trucking, China-Europe Railway Express rail transport and multimodal transport each have a corresponding cover, suited to break-bulk vessels, OOG out-of-gauge cargo, standard containers, LCL cargo, engineering equipment and other export cargo types.

2. How to Choose Among the Mainstream Marine Cargo Covers (CIC China Clauses)

• 1. FPA (Free from Particular Average): the narrowest cover. It mainly pays for total loss and constructive total loss caused by natural disasters or accidents, plus any partial loss following an accident to the carrying conveyance. It suits low-value, wear-resistant bulk raw materials that are not easily damaged by moisture; it is not suitable for precision equipment or fragile packaging.
• 2. WPA (With Particular Average): includes the full FPA liability and additionally covers partial loss caused by natural disasters, such as damage from wave immersion or seawater ingress. It is the basic cover most commonly used for exports of engineering equipment, steel and steel structures.
• 3. AR (All Risks): the first choice for high-value export cargo. It covers FPA and WPA plus general external risks: impact, crushing, rain damage, leakage, shortage, theft and similar perils.

Note: All Risks does not cover every situation. Inherent vice, defective packing, natural loss of the goods, war and strikes, and delay losses are outside the basic cover; war risk and strikes, riots and civil commotion (SRCC) must be added as separate additional risks.

Also note: the ICC clauses (Institute Cargo Clauses A/B/C, London market) are the clauses overseas buyers know best. ICC A corresponds to All Risks, ICC B is close to WPA and ICC C is close to FPA. If a letter of credit specifies ICC clauses, confirm this before the policy is placed.

3. Core Underwriting Rules and How the Insured Amount Is Calculated

3.1 How is the insured amount set? (international practice)

The insured amount is normally set at 110% of the CIF/CIP value of the goods. The additional 10% covers the buyer's expected profit and incidental charges, and it is the standard requirement under UCP600 letters of credit. Unless the insurer agrees otherwise, a mark-up above 30% is not usually recommended.

4. Claims Pitfalls: The Most Common Grounds for Rejection

1. Signing a clean delivery receipt: if damage, water ingress or shortage is found at pick-up, always note the cargo damage on the receipt and photograph the evidence. Signing a clean receipt makes a later claim extremely difficult.
2. Preserving the evidence: photograph everything immediately (outer packaging, damaged area, shipping marks, container seal and container condition), keep the bill of lading, invoice, packing list, insurance policy, survey report and tally sheet, notify the insurer promptly and strictly observe the notice period stated in the policy.

3. Compliant packing: export packing must be suitable for long-distance cross-border transport. Damage caused by inherently inadequate packing or insufficient securing is an excluded loss, and the insurer is entitled to reject the claim. For oversized equipment and uncrated engineering vehicles, the securing plan directly affects both underwriting and the claim outcome.
4. Knowing the exclusions: quality defects in the goods themselves, natural rusting, normal loss, market depreciation and indirect loss caused by transport delay are not covered by cargo insurance.

5. Bloom Supply Chain Cargo Insurance Support Services

Drawing on our export experience with engineering equipment, vehicles, energy-storage containers and project cargo, Bloom Supply Chain provides a one-stop insurance placement solution:

• Matching the right clauses (CIC / ICC) to ocean, rail, trucking, air and multimodal shipments
• Pre-underwriting review for OOG cargo, used construction machinery, uncrated equipment and break-bulk project cargo
• Checking letter-of-credit insurance document requirements to avoid discrepancies
• After a loss, coordinating the surveyor, assembling the full claim file and following the claim through

Logistics is the channel through which cross-border delivery happens; transport insurance is the safety cushion that absorbs the risk. Only by matching the right cover, insuring for full value and keeping documents in order can you prevent a single cargo loss from wiping out the profit on an entire order. If you export high-value equipment or project cargo, talk to us about your shipping plan and insurance structure.

6. Request a Cargo Insurance Consultation