Cargo & Logistics

Any company that ships goods, products, or commodities by any type of transportation should consider cargo insurance. 

Larger companies that regularly move high volumes of cargo and hold stock might benefit from an annual stock throughput policy. This type of insurance is flexible and covers all shipments throughout the year, so there is no need to purchase insurance for each shipment separately. It can be especially useful when the value of goods stored at factories or warehouses is below the deductible on their property insurance.

Smaller companies or those shipping less frequently might find it better to buy cargo insurance for each shipment individually. Cargo insurance can often be included additionally with their freight costs through the shipping carrier.

Cargo insurance premiums are based on two main factors: the value of goods being shipped and the level of risk (frequency and severity of losses) involved in transporting them.

• Valuation of goods: The valuation of cargo is usually declared by the cargo owner. A common method is to add the commercial invoice value (the amount expected from the sale of the goods) and the freight cost. To this total, an additional 10% of the freight cost is often added for transport-related expenses, followed by another 10% charge to cover miscellaneous additional costs.
• Risk assessment: The level of risk is influenced by factors such as the nature of the goods and the conditions under which they are transported. For example, cargo requiring continuous refrigeration during transit through a tropical climate is considered more vulnerable and thus carries a higher risk compared to inert products that are unaffected by temperature variations.

Logistics providers are responsible for the arrangement and transportation of goods within the global supply chain. While insurance needs vary based on the specific activities and scope of each operation. 

Logistics insurance products offer protection for all parties involved in the transport, storage, or arrangement of goods. This includes trucking companies, freight forwarders, warehouse operators, non-vessel owning common carriers (NVOCC), customs brokers, and freight brokers. Essentially, any entity that handles or manages goods during the supply chain process can benefit from logistics insurance coverage. 

The valuation of logistics insurance products varies widely based on several factors, including the specific activities performed, policy limits, historical loss experience, contractual liabilities, applicable international conventions, whether the movement of goods is domestic or international, and the overall scale of operations. A key metric used in rating these insurance products is gross freight receipts of mileage, which is considered alongside other relevant exposure data to determine appropriate premiums. 

“General average” is a well-established principle in maritime law that addresses the allocation of losses resulting from a voluntary sacrifice or expenditure made to preserve a ship and its cargo during an emergency. For example, if part of the ship or cargo is deliberately sacrificed to save the vessel and remaining cargo, the resulting loss is shared proportionally among the vessel owner and all cargo interests involved. When a general average is declared, all parties contribute to the costs on a pro-rata basis.

These expenses are typically covered under standard cargo insurance policies. Because general average claims can be substantial, cargo release often requires letters of guarantee issued by the insurance company. This letter serves as a formal commitment to cover the insured party’s share of the general average contribution.