Cargo insurance
For the majority of export sales the exporter is responsible for insuring the consignment up to the point of delivery to the buyer. However, this can vary depending on terms of the sale agreement or letter of credit.
There are three internationally used insurance categories:
- Free of particular average (FPA) is the narrowest form of cover as the insurance company does not cover you for partial loss or damage to the cargo. You are only covered if the entire consignment is lost or damaged for example when a ship sinks, or by fire. FPA cover is usually purchased to cover used goods, such as scrap metal.
- With average (WA) cover extends the FPA clause to include partial loss arising from heavy weather and seawater damage. Both FPA and WA can usually be extended to include protection from theft and pilferage.
- All risks (AR) cover is the most comprehensive cargo insurance, providing protection against loss or damage from external causes. The term 'all risks', is misleading, as it does not cover loss or damage arising from delay, inherent vice (deterioration or damage without outside help, eg milk souring), or the nature of the goods insured. Losses as a result of inadequate packaging, weight loss from drying out, or market changes are also not covered. Risks from war, strikes, riots and civil unrest are also not covered, but can be covered at extra cost.
Marine open cover
Companies with a number of monthly consignments will often take out Marine open cover (which also protects airfreight). It guarantees cover up to a specified amount for all goods in which you have an interest. Exporters must provide details of each shipment made in a declaration form at the end of each month. If the declaration is delayed or lost, continuity of cover is guaranteed even after a claim has been made. Marine open cover is generally open-ended with no expiry date and can be cancelled without prior notice.
Talk to other exporters, or contact the Insurance Brokers Association of New Zealand for details of an experienced broker about your specific insurance requirements.
Alternatively, your bank may be able to offer insurance or recommend a suitable broker.
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