Marine Cargo Insurance in the UAE: A Guide for Importers and Exporters

Goods moving by sea, air or road can be lost, stolen or damaged anywhere between your supplier's warehouse and yours, and a carrier's liability is usually limited to a fraction of the cargo's value. Marine cargo insurance pays for physical loss of or damage to your goods in transit. This guide explains how it works for UAE businesses. It's written by Al Berwaz Insurance Brokers, licensed by the Central Bank of the UAE (Registration No. 081).

The three levels of cover

• Institute Cargo Clauses (A): the widest cover. It insures against all risks of loss or damage except those specifically excluded.
• Institute Cargo Clauses (B): covers a list of named events, such as fire, sinking, collision, earthquake, and seawater entering the vessel or container.
• Institute Cargo Clauses (C): the narrowest cover. It covers major events only, such as fire, explosion, sinking or collision, and doesn't include water damage or theft.

War and strikes are excluded from all three. They are added with separate clauses: the Institute War Clauses (Cargo) and the Institute Strikes Clauses (Cargo).

Who arranges the insurance: Incoterms

The Incoterms rule in your sales contract decides who buys cargo insurance. Under CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid To), the seller must insure the goods for the buyer. Under Incoterms 2020, CIF only requires the minimum cover of Clauses (C), while CIP requires the wider Clauses (A), in both cases for at least the contract price plus 10%. Under terms such as FOB (Free on Board) and EXW (Ex Works), the buyer carries the risk for most of the journey and should arrange its own cover.

Many UAE importers buy on CIF terms and assume they're fully protected. Check the seller's policy: Clauses (C) may not pay for theft, water damage or rough handling. Many importers buy their own cover or ask the seller to upgrade to Clauses (A).

Single shipment or open cover

You can insure each shipment separately, or take an open cover: an annual policy that automatically covers all your shipments within agreed limits. You declare shipments, usually monthly, and pay premium on what you ship. Open cover suits businesses that import or export regularly, because no shipment goes uninsured by mistake.

What isn't usually covered

• Insufficient or unsuitable packing
• Ordinary leakage, normal loss in weight or volume, and ordinary wear and tear
• Inherent vice: damage caused by the nature of the goods themselves, such as fruit ripening
• Loss caused by delay, even if the delay was caused by an insured event
• Deliberate misconduct by the insured

General average

If a ship's master sacrifices cargo or spends money to save the vessel in an emergency, all cargo owners share the cost in proportion to the value of their goods. This is called general average. The shipping line won't release your cargo until you provide security for your share. Cargo insurance usually provides that security and pays your contribution, which is one strong reason to insure even low-value shipments.

How premiums are calculated

Premium is a percentage of the insured value. Insurers look at the type of goods and packing, the routes and countries, how the goods are shipped (container, bulk or air), the level of cover, your claims history and, for open covers, your annual shipment volume.

Making a claim

• Inspect on arrival: check the goods before signing a clean delivery receipt, and note any damage on it.
• Notify quickly: tell your broker or insurer at once, and hold the carrier responsible in writing within the time limits in the transport contract.
• Arrange a survey: the insurer may appoint a surveyor. Keep the damaged goods and packing until they've been inspected.
• Keep the documents: invoice, packing list, bill of lading or air waybill, and the delivery receipt.

What to prepare for a quote

• Goods: what you ship and how it's packed.
• Routes: origin and destination countries, and how the goods travel.
• Values: value per shipment and expected shipments per year.
• Terms: the Incoterms you usually buy or sell on.
• Claims: any losses over the last three to five years.

Why use a broker?

Cargo wordings, deductibles and exclusions differ between insurers. A broker compares insurers, checks that your cover matches your sales contracts, and supports you through claims and general average. Broker commission is built into the insurer's premium, so using a broker doesn't add to your cost.

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