Marine Cargo Insurance

Marine Cargo Insurance covers physical loss or damage to goods in transit, whether by sea, inland waterway, road, or rail, from the point of despatch to the point of delivery, protecting suppliers and government buyers from the financial impact of accidents, theft, or natural perils during transportation.

What is Marine Cargo Insurance?

Despite its name, marine cargo insurance in India covers all modes of transport, not just maritime movement. Under the Indian Marine Insurance Act 1963 and standard ICC clauses (Institute Cargo Clauses A, B, and C), the policy compensates for physical loss or damage to cargo during transit.

In government procurement, marine cargo insurance is relevant in two contexts:

1. Supply contracts with CIF/door-to-door delivery terms:
When a supplier is required to deliver goods to a government site or stores, the contract specifies who bears responsibility for transit risk. If the contract is on CIF (Cost, Insurance, Freight) or "door-to-door" terms, the supplier must obtain marine cargo insurance covering the transit. The government's stores officer takes delivery against an inspection note, if goods arrive damaged, the insurance claim is filed before acceptance.

2. Government import procurement:
For imported equipment and materials procured through international ICB tenders, the contract typically requires CIF pricing with marine insurance up to the Indian port of entry, and inland transit insurance from the port to the project site.

Standard coverage options:

• ICC A (All Risks): Broadest cover, all risks of loss or damage except exclusions (inherent vice, war, nuclear, delay).
• ICC B: Named perils, fire, explosion, flooding, jettison, collision, earthquake.
• ICC C: Narrowest, fire, explosion, stranding, sinking, collision only.

Government contracts typically require ICC A (All Risks) coverage. The sum insured must be at least 110 percent of the CIF value or contract value to account for salvage and incidental costs.

Why Marine Cargo Insurance matters for Indian government suppliers

Suppliers transporting high-value equipment, transformers, medical devices, heavy machinery, precision instruments, to government sites across India face significant transit risks. A truck overturning on a mountain road, a storm damaging goods in a seaport, or theft from a railway wagon can result in losses of crores of rupees. Government contracts that place transit risk on the supplier (typically F.O.B. or ex-works delivery terms) require the supplier to insure the goods. Without marine cargo insurance, a single transit loss can wipe out the entire contract margin.

Example

A transformer manufacturer wins a state electricity board supply tender for 50 distribution transformers valued at INR 3 crore. The contract is on ex-works terms, and the DISCOM arranges its own transport. The DISCOM obtains a marine transit policy under ICC A for INR 3.3 crore (110 percent of value). During rail transit, 5 transformers are damaged in a derailment. The DISCOM files a marine claim for the damaged units, receives INR 30 lakh from the insurer, and uses the funds to procure replacements from the supplier at the same contract rate.

Frequently Asked Questions

Is marine cargo insurance required for every government supply contract?

It is required when the contract places transit risk on the party arranging transport. For ex-works contracts, the buyer (government) bears transit risk and typically insures. For CIF or door-delivery contracts, the supplier bears transit risk and must insure. The NIT's delivery terms determine who must obtain the policy.

Does marine cargo insurance cover theft in transit?

ICC A (All Risks) covers theft, pilferage, and non-delivery. ICC B and ICC C do not cover theft unless specifically added by endorsement. Government contracts requiring All Risks cover ensure theft is covered.

How long does a marine cargo policy remain valid?

A voyage policy covers one specific shipment. A "floating" or "open cover" policy covers multiple shipments over a policy year, which is practical for suppliers making regular deliveries to government sites throughout the year.

What documents are required to file a marine cargo claim?

Standard claim documents include the insurance policy/certificate, commercial invoice, packing list, bill of lading or lorry receipt, survey report by a marine surveyor, and a letter of subrogation. The survey must be arranged immediately on noticing damage, before goods are moved or cleaned up.