Institute Cargo Clauses (A, B, and C) are internationally recognized insurance terms that define the level of coverage applied to cargo shipments moved by sea.
These clauses are issued by the Lloyd’s Market Association (LMA) and the International Underwriting Association (IUA), and they serve as the foundation for most marine cargo insurance contracts used in global trade today.
In practice, these clauses help establish who is responsible for covering loss or damage during transit, under what conditions, and to what extent. Clause A provides the broadest, “all risks” coverage. Clauses B and C are more limited and only cover specifically listed risks. The choice between them affects the shipper’s financial exposure during international shipping.
Freight forwarders typically offer cargo insurance based on one of these clauses as part of their service.
By aligning all parties—importers, underwriters, carriers, and insurers—on a common set of rules, the clauses help streamline claims, reduce ambiguity, and bring consistency to cross-border logistics.
While A, B, and C clauses are specific to ocean freight, a separate set of Institute Cargo Clauses applies to air shipments. However, in the context of maritime shipping, these three clauses remain the industry standard for defining risk coverage in international trade.
Frequently Asked Questions
The following are some of the most frequently asked questions about Institute Cargo Clauses and how they relate to cargo insurance, international shipping, and the services offered by freight forwarders.
What Is the Difference Between Institute Cargo Clauses (A, B, and C)?
The Institute Cargo Clauses (A, B, and C) are standard sets of terms used in international marine cargo insurance to define what risks are covered during transit. The main differences relate to the types of risks covered under each clause:
- CL382 Institute Cargo Clause (A) 010109: Also known as “All Risks” cover. This is the broadest protection available. It insures against all risks of loss or damage to the goods during transit, except for specific exclusions listed in the policy (such as willful misconduct, ordinary leakage, inherent vice, delay, war, strikes, or nuclear incidents).
- CL383 Institute Cargo Clause (B) 010109: Provides named perils coverage. This means only losses caused by specifically listed risks are covered, including fire, explosion, vessel grounding or capsizing, collision, discharge at port of distress, earthquakes, volcanic eruption, lightning, general average sacrifice, jettison, washing overboard, or entry of sea/lake/river water into the vessel. Exclusions are similar to Clause A.
- CL384 Institute Cargo Clause (C) 010109: The narrowest standard coverage. It is also a named perils policy but covers even fewer risks than Clause B, such as fire, explosion, vessel grounding, collision, discharge at port of distress, general average, and jettison. Certain natural disasters and water damage are not covered under Clause C.
Coverage details may vary by insurer and policy. Always confirm policy wording before shipping.
Are Institute Cargo Clauses Used for Air Freight Shipments?
Yes, there are dedicated insurance clauses for airfreight shipments, but they are slightly different from those used for ocean cargo. For air cargo, the relevant document is the Institute Cargo Clauses (Air), sometimes called “Air Cargo Clauses.” The standard clause document is CL387 (Institute Cargo Clauses – Air).
Unlike ocean cargo, where A, B, and C Clauses provide varying levels of coverage, airfreight typically uses a single “all risks” policy (which is broadly similar to Clause A for marine cargo, but tailored to air transport risks). Key points:
- All Risks Coverage (excluding postal sendings): Covers all risks of loss or damage during transit by air, except for listed exclusions such as willful misconduct, ordinary leakage, inherent vice, inadequate packing, delay, insolvency, war, strikes, and terrorism.
- Duration of Coverage: Protection starts when goods are first moved for loading, continues during transit, and ends upon delivery or after a set time limit (usually 30 days after unloading from the aircraft).
- Specific Exclusions: Policy wording details events that are not covered, so always review your insurer’s terms.
In addition, separate War Clauses (CL388) exist for air cargo to address war and related risks.
For full details, always refer to the actual policy document and consult your insurance provider before shipping.
Who Is Responsible for the Institute Cargo Clauses?
The Institute Cargo Clauses are standard insurance terms widely used in global marine and air cargo insurance. These clauses are developed and published by key organizations in the London insurance market—primarily the International Underwriting Association (IUA) and the Lloyd’s Market Association (LMA).
- International Underwriting Association (IUA): The IUA publishes and maintains model clauses for marine, aviation, and property insurance. Their Clauses eLibrary gives public access to the latest clause wordings, including Institute Cargo Clauses.
- Lloyd’s Market Association (LMA): The LMA also plays a central role in drafting, updating, and publishing insurance clauses commonly used by Lloyd’s and other London market insurers. You can find updated model clauses and documentation on the LMA website.
Both organizations work with underwriting committees, industry stakeholders, and legal experts to keep the clauses up to date. However, the use of these clauses is not mandatory. Individual insurers may adapt, modify, or supplement the standard wording to suit their policies or client needs.
What Role Do the Institute Cargo Clauses Play for Importers?
The Institute Cargo Clauses set the global standard for cargo insurance, providing a clear, widely recognized framework that defines what risks are covered when goods are shipped internationally. By specifying the types of losses and damages that are included or excluded, these clauses help importers understand their level of protection and enable them to make informed decisions when purchasing insurance for their shipments.
The use of standard clause wording also simplifies negotiations, claims processes, and communication between all parties involved in international trade, including insurers, importers, and exporters.
For importers, using insurance policies based on these clauses brings confidence and less confusion. If a loss or damage happens, the claims process is clearer and more predictable. Freight forwarders often help arrange insurance, but the Institute Cargo Clauses are what actually define the coverage for most international shipments.
Do Freight Forwarders Use the Institute Cargo Clauses in Cargo Insurance?
Most freight forwarders, including digital platforms, offer cargo insurance as an added service when arranging international shipments. The insurance provided by freight forwarders typically uses standard policy wordings, such as the Institute Cargo Clauses, which define what risks and losses are covered during transit. These clauses are recognized worldwide and give importers a clear idea of what is and is not included in their coverage.
While the Institute Cargo Clauses are the most common standard, it is important to note that not all insurance policies are identical. Some freight forwarders or their insurance partners may use different wording or offer additional options, so importers should always review the policy details before booking. By using policies based on the Institute Cargo Clauses, freight forwarders help make the insurance process more transparent and predictable for their customers.
How Do Incoterms Relate to Cargo Insurance and the Institute Cargo Clauses?
Incoterms are international trade rules that define the responsibilities of buyers and sellers, including who must arrange cargo insurance.
There are two Incoterms that specifically require the seller to obtain insurance: CIF (Cost, Insurance and Freight), used only for ocean and inland waterway transport, and CIP (Carriage and Insurance Paid To), which can be used for any mode of transport. Under these terms, the seller must provide insurance coverage for the buyer, typically using a policy based on the Institute Cargo Clauses, or similar terms.
For all other Incoterms, cargo insurance is not mandatory. However, buyers, or sometimes sellers, often choose to secure insurance separately to protect their goods in transit. In most cases, these insurance policies are also based on the Institute Cargo Clauses or similar standard terms.
Do I Need Cargo Insurance If My Goods Are Already Covered by the Carrier?
Carrier liability is limited by international conventions and only applies in specific situations. The compensation is often capped well below the value of your cargo, and many common risks, such as severe weather or theft, are typically excluded.
Cargo insurance offers broader protection for your shipment and typically covers losses regardless of who is responsible. For this reason, most importers and exporters choose to secure cargo insurance based on standard terms like the Institute Cargo Clauses to protect their goods during international transit.