UCP 600 Article 28: insurance cover
The document and the issuer
Article 28 is the insurance article. The document must appear to be issued and signed by an insurance company, an underwriter, or their agent or proxy. Cover notes issued by brokers are not accepted unless the credit expressly authorises them. The risks covered must be those the credit requires. A document that says “all risks” is read under the article’s own wording. Do not upgrade a weak clause because the applicant expected Institute Cargo Clauses (A).
The 110 percent figure
If the credit does not state the insurance amount, the document must show cover of at least 110 percent of the CIF or CIP value of the goods. When the CIF or CIP value cannot be determined from the documents, the minimum becomes 110 percent of the amount for which honour or negotiation is requested, or 110 percent of the gross value of the goods as shown on the invoice, whichever is greater. The percentage is a floor. A credit that states 120 percent asks for 120 percent.
Dates
The insurance must indicate that cover is effective from the date of shipment, or from the date the goods are taken in charge or shipped on board, at the place stated in the credit. A policy dated after the on-board date, without cover that attaches from shipment, is a problem under the article. The date of shipment is the date taken from the transport document, not the date the applicant emailed the cover note.
Currency and claims
The insurance document should be in the same currency as the credit unless the credit says otherwise. Claims, if payable, should be payable in that currency as well. Banks do not examine the insurer’s balance sheet. They examine the document on its face. A discrepancy is a document discrepancy. It is not a credit decision about whether the insurer is reputable, unless the credit itself named the insurer.
Do not mix the Incoterm with the credit
Under Incoterms 2020, CIF requires the seller to obtain cargo insurance, with Institute Cargo Clauses (C) as the minimum and a 110 percent figure where the cover is calculated that way. CIP uses a higher minimum, Institute Cargo Clauses (A). FOB and CFR do not require the seller to insure. None of those contract rules rewrite a credit that is silent or a credit that states its own percentage. Quote Article 28 for the document. Quote the Incoterm only for the sale contract.
Source
ICC, UCP 600, Article 28. Summary only. Read the article at iccwbo.org. Incoterms insurance is a separate ICC publication. Open the cited source.
Frequently asked questions
What percentage applies if the credit is silent?
Cover must be at least 110 percent of the CIF or CIP value. If those values cannot be determined from the documents, cover must be at least 110 percent of the amount for which honour or negotiation is requested, or of the gross value of the goods, whichever is greater.
Who may issue the document?
It must appear to be issued and signed by an insurance company, an underwriter, or their agent or proxy. A broker’s note is not that document unless the credit allows it.
Does CIF in the contract change Article 28?
The credit controls the document check. Incoterms 2020 CIF also points to a minimum of Institute Cargo Clauses (C) and 110 percent, but a credit can demand a wider cover. Examine the credit.