Marine Cargo Insurance: What Your Carrier's Liability Will Never Cover
- Iman Yusoff
- Jul 23
- 7 min read
Marine cargo insurance covers physical loss or damage to your goods in transit, up to the value you insure. Carrier liability is different and far smaller. The Hague-Visby Rules cap a sea carrier's liability at 666.67 SDR per package. The alternative is 2 SDR per kilogram, whichever is higher. That cap applies no matter what your cargo is worth.
Most SME shippers believe the carrier is responsible for their cargo. Legally the carrier is responsible, but only up to a limit set by international convention. Consequently a container of electronics and a container of sand can attract the same compensation ceiling.
This guide explains the gap between the two. It also covers the three standard cover levels and how to check your insurer is licensed.
Why carrier liability is not insurance
Carrier liability compensates you under a convention formula, not for what you lost. The Hague-Visby Rules set the ceiling at 666.67 SDR per package or unit. The alternative is 2 SDR per kilogram of gross weight, whichever is higher. SDR is the Special Drawing Right, a unit of account defined by the International Monetary Fund.
Singapore gives effect to the Hague-Visby Rules through the Carriage of Goods by Sea Act. The Act lets the Minister set local currency equivalents by order in the Gazette. Therefore confirm current Singapore figures before relying on any number you read online.
The one-year deadline most SMEs miss
Cargo claims under the Hague-Visby Rules carry a time bar of one year. The clock runs from the date the goods were delivered, or from the date they should have been delivered. Miss it and the claim dies regardless of merit. Therefore raise a claim early, even while you are still gathering evidence.
Declared value is the only way to lift the cap
The convention lifts the limit on one condition. You must declare the nature and value before shipment, and that declaration must appear on the bill of lading. Almost no SME does this, and carriers rarely encourage it. Our guide to the three bill of lading types explains what that document does and does not record.
Institute Cargo Clauses A, B and C compared
Nearly every marine cargo policy worldwide sits on one of three clause sets. The Institute Cargo Clauses are drafted and published by the Lloyd's Market Association and the International Underwriting Association of London. Clause A is broadest, Clause C narrowest, and the premium follows the cover.
The three Institute Cargo Clauses cover levels
Clause set | How cover is defined | Typical fit |
ICC (A) | All risks of loss or damage, except what the policy expressly excludes | High-value, fragile or theft-attractive cargo |
ICC (B) | A named list of risks, wider than C but narrower than A | Mid-value goods with moderate handling risk |
ICC (C) | A short named list covering major casualty events only | Low-value bulk cargo where loss is unlikely to be partial |
Read the difference this way. Clause A asks what is excluded. Clauses B and C ask what is included. Consequently a loss absent from the B or C list is not covered. That holds even when nothing in the policy excludes it.
Lloyd's reproduces the Institute Cargo Clauses in its cargo claims training material. It does so by permission of the LMA and IUA (Lloyd's, Cargo Claims and Recoveries). Ask your insurer which clause set appears on your schedule, in writing.
What your Incoterm says about who insures
Only two Incoterms oblige a party to buy insurance: CIF and CIP. Every other term is silent on insurance, which means nobody is contractually required to arrange it. Therefore a DAP or FOB shipment can travel entirely uninsured while both parties assume the other arranged cover.
CIF and CIP also differ in the level of cover required. Our Incoterms 2020 guide to costs and risk sets out which clause level each term demands. For a term with no insurance obligation at all, see our breakdown of DAP and who carries the risk.
Insurance is part of your customs value too
Singapore Customs requires freight and insurance charges inside the declared value of imported goods (Singapore Customs, Import Procedures Overview). Therefore the premium sits inside the base your GST is calculated on. Factor it into your landed cost calculation rather than treating it as an afterthought.
General average: the bill nobody expects
General average is a maritime principle older than modern insurance. A ship's master may sacrifice cargo or incur extraordinary expense to save the voyage. Every cargo owner then shares that cost proportionally. Your goods do not need to be damaged for you to owe money.
The practical consequence is severe. The shipowner can hold your cargo at destination until you provide security for your share. An uninsured shipper must fund that security from working capital, while an insured shipper's policy responds. Consequently general average is the scenario where cargo insurance most often pays for itself.
Check your insurer is licensed before you buy
Insurers and insurance brokers in Singapore are licensed and governed under the Insurance Act. The Monetary Authority of Singapore recognises several categories. These include licensed insurers, authorised reinsurers and approved Marine, Aviation and Transit insurers (MAS, Insurance Regulation). Marine cargo cover sits in that MAT category.
Verify any insurer or broker before you place cover. MAS publishes a searchable Financial Institutions Directory. It lists every regulated entity and what it may carry out (MAS, Financial Institutions Directory). Additionally, brokers appear there as registered or approved insurance brokers.
What SME shippers get wrong
I have handled cargo claims for 25 years across the Singapore–Malaysia–Indonesia corridor. Three mistakes repeat far more than any other. None of them involve bad luck. All three are decisions made before the cargo moved.
Assuming the forwarder's liability is cover. A forwarder's liability follows trading conditions and convention limits, not your invoice value.
Buying Clause C to save premium on fragile goods. The saving disappears on the first partial-damage claim that Clause C never listed.
Insuring the goods but not the freight and duty. A total loss still leaves you out of pocket for everything you already paid to move it.
The third one stings most. Insuring only the invoice value ignores the freight, insurance and duty already spent. That is why CIF and CIP oblige cover above the contract price rather than at it.
Iman Yusoff founded IFG Shipping Pte Ltd and has spent 25 years in freight across Southeast Asia. His career spans global forwarding at Panalpina, now DSV, and SDV, now Bolloré, plus NVOCC operations along the Singapore–Malaysia–Indonesia corridor. He serves as Board Member and Secretary of the Singapore Malay Chamber of Commerce and Industry. See Iman Yusoff's freight background.
Cargo that needs cover most
Some shipments carry risk that no clause level makes cheap. Out of gauge and project cargo travel on flat racks, exposed to weather and handling. Our guide to shipping out of gauge cargo to Singapore explains why cover is non-negotiable on those moves.
Questions SME shippers ask about marine cargo insurance
Is marine cargo insurance compulsory?
No law compels a shipper to insure cargo. However, CIF and CIP oblige one party to arrange cover under the sales contract. Banks financing a shipment also commonly require an insurance certificate before releasing funds. Every other Incoterm leaves insurance entirely optional.
Does my freight forwarder already insure my cargo?
Usually not. A forwarder carries liability cover for its own negligence, which is a different product with different limits. Ask directly whether cargo insurance is arranged, at what clause level, and for what insured value. Get the answer in writing before the cargo moves.
What is the difference between ICC A and ICC C?
ICC (A) covers all risks of loss or damage except what the policy excludes. ICC (C) covers only a short named list of major casualty events. A loss that falls outside the ICC (C) list is not covered, even when no exclusion applies to it.
How long do I have to make a cargo claim?
Claims against the carrier under the Hague-Visby Rules face a one-year time bar. It runs from delivery, or from when delivery should have occurred. Your policy will also set its own notification deadlines, which are usually much shorter. Notify both the carrier and the insurer immediately.
What does general average mean for a small importer?
General average means you may owe a share of a shipowner's sacrifice or extraordinary expense. That applies even when your own goods arrive undamaged. The shipowner can hold your cargo until you provide security. A cargo policy normally responds to that contribution.
How do I check an insurer is legitimate in Singapore?
Search the MAS Financial Institutions Directory for the company name. The directory lists every entity MAS regulates and the activities it is authorised to provide. If a party offering you cover does not appear there, treat that as a reason to stop.
Not sure what your cargo is actually covered for?
Send us your shipment details and the cover you were offered. We will tell you which clause level applies and what the carrier's liability would realistically pay. Then we will show you the gap between the two.
WhatsApp: +60 14-325 8325
Email: contact@ifgshipping.com
Office: 51 Changi Business Park Central 2, Singapore 486066
Sources
Lloyd's — Cargo Claims and Recoveries (Institute Cargo Clauses reproduced by permission of the LMA and IUA): assets.lloyds.com
Monetary Authority of Singapore — Insurance Regulation: mas.gov.sg
Monetary Authority of Singapore — Financial Institutions Directory: eservices.mas.gov.sg
Singapore Customs — Import Procedures Overview: customs.gov.sg
Disclaimer. This guide provides general trade information. It is not insurance, legal or financial advice, and it recommends no specific product, insurer or broker. Cover terms, exclusions, liability limits and statutory figures change and vary by policy, carrier and jurisdiction. This article quotes no premium figures. Confirm current liability limits, policy wording and licensing with a MAS-licensed insurer or registered broker. Consult your own legal adviser before you place cover.
Editorial note: written for ASEAN SME importers and exporters. SEO, AEO and GEO editorial support by SingRank.
Comments