Quick Answer
The most common basis for international cargo insurance is the Institute Cargo Clauses (ICC), published in London by the Lloyd’s Market Association (LMA) and the International Underwriting Association (IUA); the current version dates from 2009. There are three forms: ICC (A) is “all risks” cover, covering everything except listed exclusions; ICC (B) and ICC (C) cover named perils only, with (C) the narrowest and cheapest. Incoterms 2020 require: under CIF, the seller insures at minimum ICC (C); under CIP, the seller insures at minimum ICC (A), both for 110% of the invoice value.
ICC (A) vs (B) vs (C)
| Comparison | ICC (A) | ICC (B) | ICC (C) |
|---|---|---|---|
| Basis of cover | All risks except exclusions | Named perils | Named perils (fewer) |
| Examples covered | Most accidental loss, including theft and water damage (except excluded items) | Fire, explosion, stranding, collision, general average, jettison, entry of sea or river water, etc. | Fire, explosion, stranding, collision, general average, jettison, etc. |
| Burden of proof | Insurer must prove the loss falls under an exclusion | Insured must prove the loss was caused by a named peril | Same as (B) |
| Premium | Highest | Medium | Lowest |
Actual cover and exclusions depend on each insurer’s policy wording.
Insurance Rules in Incoterms 2020
| Term | Who insures | Minimum cover | Sum insured |
|---|---|---|---|
| CIF | Seller | ICC (C) | 110% of invoice value |
| CIP | Seller | ICC (A) | 110% of invoice value |
| Other terms | As agreed (usually decided by the party bearing the risk) | — | — |
So if you buy ingredients on CIF, the seller only has to buy the minimum ICC (C), and common losses such as water damage and theft may not be covered. The buyer can require ICC (A) in the contract or buy extra cover. See FOB vs CIF vs CFR.
What Cover Do Food Ingredients Need?
- Goods sensitive to moisture or packaging damage (such as powders and tea leaves): consider ICC (A).
- Frozen or chilled goods: check whether risks such as refrigeration failure are covered; this usually needs a separate agreement.
- High-value or fragile goods: assess both sum insured and type of cover.
What to Do When a Loss Occurs
- Photograph and record damage immediately, and notify the insurer or its agent.
- Give written notice of claim to the carrier or other parties to preserve recovery rights.
- Prepare documents: insurance policy, bill of lading, commercial invoice, packing list, proof of loss and survey report.
How Tang Sugar Can Help
In export and triangular and multilateral trade, Tang Sugar recommends Incoterms and helps clarify where transport and insurance responsibilities lie. If you need different insurance terms in a quotation, contact us.
FAQ
What is the difference between ICC (A), (B) and (C)?
ICC (A) is all-risks cover except listed exclusions; (B) and (C) cover only named perils, with (C) the narrowest and cheapest.
What insurance is required under CIF?
Under Incoterms 2020, the seller must insure at minimum ICC (C) for 110% of the invoice value.
How does CIP insurance differ from CIF?
Incoterms 2020 require minimum ICC (A) under CIP and ICC (C) under CIF; both are for 110% of the invoice value.
Who publishes the Institute Cargo Clauses?
The Lloyd’s Market Association (LMA) and the International Underwriting Association (IUA); the current version was revised in 2009.
How is the cargo insurance premium calculated?
Usually sum insured × premium rate. The sum insured is often 110% of the invoice value (also the minimum under Incoterms 2020 CIF and CIP); the rate depends on the goods, route, transport mode and clauses, so ask an insurer or forwarder for a quote.
Further Reading
Sources
- Trade Finance Global: Carriage and insurance paid to (CIP) Incoterms® 2020 rule
- James Hallam: Institute Cargo Clauses A, B and C Differences
- International Chamber of Commerce: Incoterms® 2020 checklist
