How to use Institute War Clauses in marine cargo insurance policies?

War risk is an important risk factor in international cargo transportation.

Most sea routes used by multinational carriers are passing through or near active war regions or potential war risk related areas.

Especially issuing banks in letter of credit transactions should take war risks very seriously and demand an insurance policy covering war risks.

Today I would like to explain the importance of "Institute War Clauses" in international insurance policies.

After reading this short article you should be able to understand whether current cargo insurance clauses cover war risks or not and how to get insured against war risks.

 

Do cargo insurance clauses cover war risks?

There are 3 types of cargo insurance coverage available in international trade where the goods are being transported via sea transportation in containers. 

These international cargo insurance types are defined by the clauses, which are the main determinants of the cargo insurance policy's scope of coverage.

• Institute Cargo Clauses (C) (minimum cover) 
• Institute Cargo Clauses (B) (medium cover) 
• Institute Cargo Clauses (A) (maximum cover) (all risks)

Although above mentioned cargo clauses cover different levels of risks, none of them insures the goods against war risks.

This is because of the fact that all cargo clauses define war risks under exclusion clauses. As a result war risks have been excluded from all cargo clauses. 

On below table you can find the text of War Exclusion Clauses Under Institute Cargo Clauses A, B and C.

War Exclusion Clauses Under Institute Cargo Clauses A, B and C
In no case shall this insurance cover loss damage or expense caused by

• war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

• capture seizure arrest restraint or detainment (piracy excepted), and the consequences thereof or any attempt thereat

• derelict mines torpedoes bombs or other derelict weapons of war.  

How to get insured against war risks in international shipping?

In order to get insured against war risks, exporter or importer should include Institute War Clauses on the insurance policy by paying an extra premium.

INSTITUTE WAR CLAUSES (CARGO)RISKS COVERED

Risks

This insurance covers loss of or damage to the subject-matter insured caused by

• war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power
• capture seizure arrest restraint or detainment, arising from risks covered under article stated above, and the consequences thereof or any attempt thereat

• derelict mines torpedoes bombs or other derelict weapons of war. 

Important Note: Once you compare the texts of "War Exclusion Clauses Under Institute Cargo Clauses A, B and C" and "Institute War Clauses", you will realize that the texts are identical.

"Institute War Clauses" covers the risks what is exactly excluded on all of the Institute Cargo Clauses.