Marine Insurance

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Increased globalisation over the last few decades has made the world a smaller place. Today, there is a regular export of goods made in India to countries across the world and vice versa. With global online marketplaces, the import of foreign-made is the norm. Such import-export is only possible today because of the shipping industry. Every day ships carrying goods worth millions of dollars travel across oceans.  Hence, insurance coverage in the form of marine insurance is a necessity. Ship and cargo owners buy marine insurance for financial protection. One of the sub-categories of marine insurance is contingent cargo insurance.

What is contingent cargo insurance?

Contingent cargo insurance is relatively new to the marine insurance space. It was first introduced in the 1980s. So, contingent car insurance is considered an insurance plan for freight brokers. It covers complex claim settlements between shippers and carriers. The word ‘contingent’ here implies that this insurance is not the primary insurance. Rather it takes effect when the carrier’s general cargo insurance does not pay up. This happens due to insufficient limits, damage or loss exclusions, policy cancellations, and so on.

The main parties involved in contingency insurance are:

  • The shipper:

    This is the shipping company supplying the goods for transport.

  • The carrier:

    The company that does only the freight work. It uses different modes of transport to move goods across land and sea.

  • The freight broker:

    The entity that negotiates deals between shippers and carriers.

  • The managed risk club:

    These are groups that underwrite cargo insurance policies. These policies protect the cargo that the carrier ships (on behalf of the shipper)

Regular cargo insurance protects the shipper if there is cargo damage or loss. If any loss occurs, the carrier files an insurance claim that the insurance company pays out. Here, the freight broker is not involved in these cases. However, in certain cases, the insurance company denies the general cargo insurance claim. The shipper then holds the freight broker accountable. So, contingent cargo insurance now comes into play. This makes contingent cargo insurance important for all freight brokers.

What does contingent cargo insurance cover?

Contingent cargo insurance is a niche product. It covers a complex area of marine insurance. It relates to specific circumstances.

Contingent cargo insurance covers the gaps in general cargo insurance coverage. It covers everything from the damage of the goods to loss due to theft. It also covers every mode of transportation involved in freight. So, it includes losses and damage caused on any common carrier such as ship, truck, or rail. It covers losses due to a ship sinking or a train wreck. Suppose a ship’s crew jettisons cargo to save a ship. The insurance company charges the loss of the cargo to the shipper. Here, contingent cargo insurance makes the claim settlement.

Why is contingent cargo insurance required?

Freight brokers are not required by law to carry this type of insurance. However, it offers freight brokers coverage when they are held liable for cargo that suffers damage or loss before it reaches the shipping company. So, there are significant reputational benefits to having this type of insurance.

Businesses will collaborate with other regular businesses that protect the interest of the customers. This insurance acts as a guarantee that the freight brokers would fulfil an insurance claim when carriers refuse to pay.

Here is an example:

A shipper would contract a carrier to transport the freight. An unforeseen event occurs, resulting in the loss of the shipper’s cargo.

The shipper recoups the cargo loss and turns to the actual freight broker. So, if the regular freight broker is unable to pay back the shipper, the shipper will lose trust in them.

In this case, the freight broker will develop a bad reputation. Businesses will be wary of dealing with them. This will also lead to further loss as carriers will not want to work with them.

Some shippers only partner with freight brokers who have this insurance. 

What are the key factors affecting premium calculation in contingent cargo insurance?

  • Type of cargo

Underwriters want to know what type of cargo will undergo transportation. The different types of cargo are consumer goods, industrial materials, commodities, and more. Some goods attract higher premiums than others. For example, cement has higher premiums, as any contact with seawater results in a total loss. Underwriters deem goods with higher salvage values to be safer. Hence, they have lower premium rates. Perishable goods also have high premium rates. This is because there is little salvage value once there is contamination or damage. Luxury items, large machinery, flammable materials, and valuable electronics all have high premiums.

  • Voyage or shipping route

Certain voyages or shipping routes are riskier than others. So, shipments that travel through risky waters have higher insurance premiums. So, the following factors can attract higher premiums:

  • Shipping routes through remote, treacherous, mountainous, or icy areas
  • Political instability in the country of origin or destination
  • Ports of loading and discharge that do not have good facilities.
  • Type of Coverage

Different types of coverage can affect premiums. Shipment-by-shipment coverage is ideal for policyholders who ship infrequently. Annual policies cover many shipments under a single policy. Also, annual policies allow policyholders to ship frequently under a single policy. So, the policyholder pays less than if they had to buy coverage for every shipment.

  • Loss history

Underwriters take note of any previous losses faced by the applicant when they apply for coverage. Insurance applications have questions about prior losses that the applicant has to answer. This is so that insurers can determine the risk potential of the applicant. Many losses will attract high premiums. The insurers also want to know the steps taken to prevent future losses. 

  • Risk management strategy

Insurers may offer lower premiums if applicants show a proper risk management strategy. So, shippers should adhere to proper risk management training and protocols. These include disaster preparation methods, workplace safety measures, theft prevention methods, and so on. Such interventions are an assurance to insurers who will be more inclined to offer lower premiums.

  • Type of vessel

One more key factor in the premium calculation is the type of vessel used. Insurers want to know about various facets of the vessel transporting the goods. For example, they will ask about the age of the vessel. They will also ask which shipping company manages the vessel. They will also enquire about the vessel’s protection and indemnity coverage. However, older vessels may attract higher premiums as they could be slow and subject to piracy. 

What are the steps for claim settlement in contingent cargo insurance?

  • Take action to minimise the damage and loss:

Take the appropriate corrective measures to minimise the loss or damage to the goods. Reasonable precautions and care for the goods is a pre-condition in marine insurance. All concerned parties should ensure adequate safety measures are being used. When loss or damage occurs, all parties should try to lessen the extent of loss and damage.

  • Notify the insurance company:

Inform the insurance company immediately about the loss and damage to the cargo. They provide details of the events leading to the loss. Then, the insurer will let you know about the next steps. The insurance company will provide an acknowledgement letter on receiving a formal claim. The insurance company will review the damages. They will also check if safety measures were taken during the transit. 

  • Notify the shipping company:

Inform the shipping company of the loss and damage to the cargo. Here, again, the shipper provides a formal acknowledgement letter. All details of the event must be provided to both the shipper and the insurer. Lodge an FIR with the police if the cargo is stolen.

  • Expect a survey:

The insurer appoints a surveyor to investigate the damage or loss of cargo. The surveyor submits the findings to the insurance company. The surveyor’s findings influence any further claim procedures. 

  • Timely submission of all documents:

Immediately notifying the insurer and shipper speeds up the claims process. There is usually a time limit of one year for filing an insurance claim. Timely submission of all the necessary documents ensures a hassle-free claims process.


Contingent cargo insurance is a niche product that is a must-have for freight brokers. If you are a freight broker without this insurance, look for a plan immediately. It is best to offer your customers peace of mind and protect your reputation.

About The Author


MBA Insurance and Risk

With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.