Insurance Considerations for Trade from War Zones

The increasing commercial risks in the Black Sea have once again highlighted the importance of insurance. However, contrary to common assumptions, not every insurance policy covers every type of loss or damage. Therefore, regardless of whether you are the buyer or the seller, or which party is responsible for procuring the insurance, particular attention should be paid to the following matters.

Institute Cargo Clauses

• GAFTA/FOSFA Clauses: If the grain is traded under standard Grain and Feed Trade Association (GAFTA) contracts, the insurance should specifically comply with the standard GAFTA insurance terms. These generally incorporate the ICC clauses but may also include additional clauses specifically tailored to the international grain trade.
• ICC (A) “All Risks”: Institute Cargo Clauses (A) 1/1/09 provide the most comprehensive and recommended cover for agricultural commodities. This cover, which is particularly important for grain, covers physical loss of or damage to the grain caused by external factors, as grain is highly susceptible to water damage, condensation (sweat), heating, and contamination during transit. Please also review the special terms and conditions of your insurance policy to determine whether it contains any extensions of cover or exclusions.

War and Strikes Risks Cover

• Institute Strikes Clauses (Cargo): This covers physical loss of or damage caused by strikers, locked-out workers, or acts of terrorism.
• Institute War Clauses (Cargo): Standard cargo insurance strictly excludes acts of war, naval mines, and hostilities. Given the ongoing conflict and the recent attacks on bulk carriers navigating the Black Sea, securing a separate war risk endorsement is absolutely mandatory for this route.

Sanctions Compliance and Exclusions

• Sanctions Limitation and Exclusion Clause: As the cargo is loaded in Russia, international insurers and reinsurers will require strict compliance with economic sanctions and price caps. Your policy should include wording evidencing that the transaction, the vessel, and the banking institutions involved do not violate the current international sanctions applicable to Russian exports. Please request an endorsement from your insurer specifically confirming the insurance cover and sanctions compliance in respect of the shipment in question.

Vessel and Carrier Insurance (for the Charterer/Buyer)

• Charterer’s Liability Insurance: If you are chartering the vessel—for example, under a voyage charter or time charter—this insurance protects you against liabilities towards the shipowner, such as hull damage caused by the cargo, as well as demurrage disputes.
• P&I (Protection and Indemnity) Verification: Ensure that the carrying vessel has valid P&I insurance with an International Group (IG) club or another reputable P&I insurer, covering third-party liabilities, including cargo claims that may arise if the grain is damaged due to the vessel’s unseaworthiness.

Incoterms Rules Determining Responsibility

• FOB (Free on Board)/CFR: You, as the Turkish buyer, are responsible for arranging the insurance from the moment the grain is loaded on board the vessel at the Russian port.
• CIF (Cost, Insurance and Freight)/CIP: The Russian seller is contractually obliged to procure marine cargo insurance. Ensure that the contract stipulates ICC (A) cover and expressly includes war risks.

Finally, it should be borne in mind that an insurer is not your commercial partner but an independent commercial entity operating for profit. In short, it is important to remember that your obligation, as a merchant, to act prudently and with due commercial diligence continues to apply.

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