Key takeaways
- Under FOB, CFR and CIF the risk of loss or damage passes to the buyer when the goods are on board the vessel at the port of shipment, so a Malaysian importer buying FOB or CFR has to arrange its own marine cargo insurance.
- Under CIF the seller buys the insurance, but Incoterms 2020 keep Institute Cargo Clauses (C) as the default minimum; a buyer who wants all risks (A) cover must agree it with the seller or buy extra cover.
- ICC (C) only pays for listed events such as fire, explosion, sinking, collision, overturning of the land vehicle, general average and jettison; theft, rainwater and rough handling are not on its list, while ICC (A) covers all risks except stated exclusions.
- Even ICC (A) excludes insufficient packing, inherent vice, ordinary leakage and wear and tear, delay, and war and strikes, which need separate clauses.
- A lorry's motor policy does not cover the goods on board; road deliveries need goods in transit cover, and Great Eastern General's checklist for these claims asks for the delivery order, the contract of carriage and a police report where there is one.
- Under the Hague Rules in Malaysia's Carriage of Goods by Sea Act 1950, hidden damage should be reported to the carrier in writing within 3 days, liability is capped at £100 per package unless the value was declared, and suit must be brought within one year.
FOB, CFR or CIF: who should insure the cargo?
The Incoterms rule on your invoice decides two things: when the risk of loss or damage moves from the seller to the buyer, and who has to buy insurance. MATRADE’s Beginner’s Guide to Exporting explains that under FOB, CFR and CIF the risk passes when the goods are on board the vessel at the port of shipment. Whoever carries the risk after a given point should make sure that part of the journey is insured.
| Term on the invoice | Risk moves to the buyer | Who pays sea freight | Who should arrange cargo insurance |
|---|---|---|---|
| EXW (Ex Works) | When the goods are placed at the buyer’s disposal at the seller’s premises | Buyer | Buyer, for the whole journey from the seller’s factory |
| FOB (Free on Board) | When the goods are on board the vessel at the port of shipment | Buyer | Buyer for the sea voyage; seller for its own trip from the factory to the port |
| CFR (Cost and Freight, also written C&F) | On board the vessel at the port of shipment | Seller | Buyer, even though the seller paid the freight |
| CIF (Cost, Insurance and Freight) | On board the vessel at the port of shipment | Seller | Seller, at least Institute Cargo Clauses (C) unless more is agreed |
What this means for a business in Malaysia:
- Importing on FOB or CFR (common when you buy raw materials or stock from overseas): the sea voyage is your risk. If nothing is insured and the container is damaged at sea, the loss is yours.
- Importing on CIF: the seller buys the policy, but the ICC’s Incoterms 2020 page says Institute Cargo Clauses (C) remain the default level of cover for CIF, with the option to agree a higher level. MATRADE adds that a buyer who wants more protection must either agree it expressly with the seller or make its own extra insurance arrangements. Ask the seller for the policy or certificate, and check the insurer, the clauses and where claims are handled.
- Exporting on FOB or CFR: your risk ends only when the goods are on board, so the lorry run from your factory to the port, the wait at the port and the loading are still yours. That leg needs goods in transit or marine cover in your own name.
- Exporting on CIF: you must buy the policy for your buyer. Check which clauses the buyer’s contract or letter of credit asks for, because Incoterms 2020 only set the minimum.
FOB, CFR and CIF are rules for sea and inland waterway transport, as the US International Trade Administration’s Incoterms summary sets out. For air freight, a rule meant for any mode of transport, such as CIP, fits better, and the ICC says CIP now requires a higher level of cover, compliant with Institute Cargo Clauses (A) or similar clauses.
What does marine cargo insurance cover? Institute Cargo Clauses A, B and C
Cargo cover is described by the Institute Cargo Clauses (ICC), the same standard wordings the Incoterms rules use to set the CIF and CIP minimums. ICC (A) is all risks: it covers all risks of loss of or damage to the goods except what the clauses exclude. (B) and (C) are named perils: the loss must be linked to an event on a fixed list, and (C) has the shortest list. The Lloyd’s Cargo Claims and Recoveries Manual puts the difference simply: under (A) you only need to show that something accidental happened, while under (B) or (C) you must show what happened and link it to one of the named perils.
| Event | ICC (A) | ICC (B) | ICC (C) |
|---|---|---|---|
| Fire or explosion | Covered | Covered | Covered |
| Vessel stranded, grounded, sunk or capsized | Covered | Covered | Covered |
| Overturning or derailment of the land vehicle | Covered | Covered | Covered |
| Collision of the vessel or vehicle with any external object other than water | Covered | Covered | Covered |
| Discharge of cargo at a port of distress | Covered | Covered | Covered |
| General average sacrifice and jettison | Covered | Covered | Covered |
| Earthquake, volcanic eruption or lightning | Covered | Covered | Not listed |
| Washing overboard | Covered | Covered | Not listed |
| Sea, lake or river water entering the vessel, container or place of storage | Covered | Covered | Not listed |
| Total loss of a package lost overboard or dropped while loading or unloading the ship | Covered | Covered | Not listed |
| Theft, shortage, rainwater, rough handling | Covered unless an exclusion applies | Not listed | Not listed |
Great Eastern’s own Marine Cargo and Freight Insurance page lists the same kind of events as its key benefits, from fire and sinking to jettison, general average and salvage charges, and the entry of sea, lake or river water. Which set of clauses applies to your goods is written on the policy schedule or certificate, so check it before the goods leave.
Warehouse to warehouse. Under the transit clause of ICC (A), cover starts when the goods are first moved in the warehouse for immediate loading, continues during the ordinary course of transit, and ends at the first of these: unloading at the final warehouse named in the policy, unloading at any other warehouse you choose to use for storage or distribution, or 60 days after the goods are discharged from the ship at the final port. A container left at the port for too long, or a loaded lorry used as a store, can fall outside the transit cover.
Insurable interest. The clauses also say you can only recover if you had an insurable interest in the goods at the time of the loss. An importer buying FOB may not be able to claim for damage that happened at the seller’s factory before loading, because at that point the goods were still at the seller’s risk.
Goods on a lorry inside Malaysia: is the cargo covered on the road?
Not by the lorry’s own policy. Motor insurance for a lorry covers the vehicle and third party liability, not the goods it carries (more on that in my lorry insurance page). The goods need cover of their own.
PIAM, the General Insurance Association of Malaysia, describes goods in transit insurance as cover for loss or damage to goods while they are transported by road, rail or air, against risks like accidents, theft or weather-related incidents. It describes motor truck cargo insurance as cover for goods on trucks against collisions, theft or damage caused by improper loading or unloading. Typical trips that need this kind of cover:
- Your own lorries delivering finished goods from a factory in Shah Alam, Klang or Puchong to customers around the Klang Valley.
- Stock sent with a hired transporter or a forwarder’s truck.
- The leg from your factory to Port Klang for an FOB export, before the goods are on board.
- Raw materials brought from the port to your warehouse when your marine policy does not run warehouse to warehouse.
| Where the goods are | Cover that usually applies | What to check |
|---|---|---|
| At sea, on an import or export | Marine cargo insurance (ICC A, B or C) | The clauses, the insured value, when the transit clause ends |
| On a lorry within Malaysia | Goods in transit (inland transit) insurance | The limit per lorry or per trip, conditions on theft, who drives |
| In your own warehouse or shop | The stock section of your fire policy | Whether the stock sum insured is enough, and whether flood is added |
| Damage to the lorry itself or to other people | The lorry’s commercial motor policy | That the policy is valid for the lorry’s use |
Before I arrange road cover for a business, I ask what is carried, the highest value on one lorry, whether you use your own lorries or hired transporters, the usual routes, and whether loaded lorries are ever parked overnight. These answers decide the limit and the conditions. A policy that does not match how you really deliver is where claims run into trouble.
If a hired transporter damages or loses your goods and the loss is covered, your own insurer deals with your claim; after paying, the insurer can take over your rights against the transporter, which the Lloyd’s manual describes as subrogation. That is why Great Eastern General’s goods in transit checklist asks for the contract of carriage and your letters with the forwarder or transporter on liability.
What is not covered? Common exclusions in cargo insurance
Even ICC (A), the widest standard cover, has written exclusions. PIAM’s guide to marine insurance lists the common ones as inherent vice, improper packaging, wear and tear, and war and strikes.
| Exclusion | What it looks like in practice | How to avoid the gap |
|---|---|---|
| Insufficient or unsuitable packing, including stowage in a container done by you or before cover starts | Cartons too weak for a normal sea or road trip get crushed; a container stuffed loosely at your own warehouse | Use export-grade packing and pallets, and photograph the packing and container stuffing |
| Inherent vice or the nature of the goods | Fruit ripening or rotting, metal rusting | Tell the insurer about perishable, moisture-sensitive or chilled goods before cover starts and ask what terms apply |
| Ordinary leakage, ordinary loss in weight or volume, ordinary wear and tear | Normal evaporation or shrinkage of the goods | Describe the goods accurately in the proposal |
| Delay, and loss of market | Goods arrive late and miss a festive sales season | Handle delay in your sales contract; PIAM says delay and market losses are generally not covered |
| Unseaworthy vessel or unfit container, where you knew about it at loading | Loading into a container you know is damaged | Inspect containers before stuffing |
| Insolvency or financial default of the ship’s owners or operators, where you knew or should have known | Choosing a carrier already known to be in financial trouble | Use established carriers and forwarders |
| War, strikes, riots, civil commotion and terrorism | Cargo damaged during a strike or riot at a port | Ask whether war and strikes clauses can be added; PIAM says these need specialised cover |
| Wilful misconduct of the insured, and nuclear weapons or radioactive devices | Loss caused deliberately by the insured | Always excluded |
If you buy (B) or (C), there is one more gap to keep in mind: any event that is not on the list is not covered, such as theft, rainwater or rough handling. So read which clauses you are buying before you compare quotes, not after a container arrives wet.
How much should I insure for, and should I insure each shipment or the whole year?
Insure the full value of the goods as they arrive: the invoice price plus freight and insurance (the CIF value), often with a margin on top. In the worked examples in the Lloyd’s manual, goods with a CIF value of USD60,000 are insured for USD66,000, which is 10% more. Under-insuring cuts every partial loss payment, because a partial loss is paid as a share of the insured value.
Single shipment or open cover? If you import or export a few times a year, each shipment can be insured on its own. If containers move every month, an open cover may suit you better. The Lloyd’s manual explains that an open cover runs for a period of time, and the actual insurance for each consignment is the declaration you make to it, so every shipment has to be declared as the policy requires.
What does it cost? I do not quote premiums on this site. The insurer prices cover on the goods, their packing and value, the route and the clauses you choose, so I need those details to ask for a quote.
| Worked example (assumed figures, for illustration only) | Figure |
|---|---|
| Business | A trading company in Puchong imports 200 cartons of kitchenware on CFR Port Klang terms |
| Invoice value including sea freight | RM100,000 |
| Insured value (assumed 10% margin) | RM110,000 |
| Cover | ICC (A), warehouse to warehouse |
| Loss | 50 cartons arrive soaked by seawater |
| Depreciation on the damaged cartons agreed with the surveyor (assumed) | 40% |
| Insured value of the damaged cartons | RM110,000 ÷ 200 × 50 = RM27,500 |
| Claim before any excess | RM27,500 × 40% = RM11,000 |
| Same loss with only ICC (C) | Seawater entry is not a named peril in (C), so the claim depends on linking the damage to a listed event such as stranding or sinking |
The method follows the partial loss examples in the Lloyd’s manual. What is actually paid depends on your policy wording, the excess and the insurer’s findings.
Cargo arrived damaged or short: how do I claim?
- Check before you sign. Look at the container, the seal and the cartons on delivery, and write any damage or shortage on the delivery order or receipt. The Lloyd’s manual warns that accepting cargo without comment gives the carrier a prima facie case that the goods were sound when delivered.
- Tell the carrier in writing. Under the Hague and Hague-Visby Rules, notice should be given at delivery if the damage is apparent, or within 3 days if it is not; otherwise taking the goods away counts as prima facie evidence that they were delivered as described in the bill of lading. Malaysia’s Carriage of Goods by Sea Act 1950 (Act 527), which applies the Hague Rules to shipments from ports in Peninsular Malaysia, says the same. For road deliveries, write to the transporter straight away.
- Notify your insurer or agent at once and ask for a survey. Unless the insurer agrees, do not throw away, sell or repair damaged goods before the surveyor has seen them. Take photos and keep the packing.
- Limit the loss. Clause 16 of the Institute Cargo Clauses makes it your duty to take reasonable steps to avert or minimise the loss and to preserve your rights against carriers; the insurer reimburses charges properly and reasonably incurred in doing so, on top of the claim.
- Make a police report for theft or a road accident. Great Eastern General’s goods in transit checklist lists the police report where there is one.
- Collect the documents in the table below and submit them with your claim bill.
- Watch the one-year time bar. Under the Hague and Hague-Visby Rules, the carrier is discharged from liability unless suit is brought within one year of delivery. Your insurer will want that right kept alive, so do not let letters with the carrier drift.
| Documents (Great Eastern General marine checklist) | Marine cargo (sea or air) | Goods in transit (road) |
|---|---|---|
| Claim form or policy | Original policy or certificate of insurance | Duly completed claim form |
| Claim bill | Yes | Yes |
| Transport papers | Original bill of lading or air waybill, forwarder’s delivery order | Delivery order, copy of the contract of carriage |
| Invoice and packing list | Invoice and packing list or weight note | Supplier’s invoice and packing list |
| Liability letters | Notice of claim against carriers, port authority and forwarder, and their replies | Correspondence with the forwarder or transporter on liability |
| Reports | Port survey report or airline damage report; QC report; technical report for machinery | QC report; technical report for machinery |
| Other | Customs declaration form; tally sheets and delivery receipts for shortage claims; repair or replacement bills | Police report if any; repair or replacement bills |
| Company papers (since 1 October 2021) | For a Sdn Bhd: Forms 24 and 49 or the section 78 and 58 notices, or the latest annual return, plus the authorised signatory’s NRIC | |
Why not just claim from the shipping line? Under the Hague Rules in the Malaysian Act, the carrier’s liability is capped at £100 per package or unit unless the nature and value of the goods were declared before shipment and written in the bill of lading. The Lloyd’s manual gives the Hague-Visby limit as 2 SDRs per kg or 666.67 SDRs per package, whichever is higher. That gap is the reason to hold your own cargo insurance. Great Eastern General takes marine claims through its online portal, by email to claimscare-my@greateasterngeneral.com or on its toll-free line 1300-13-1088, as its marine claim page sets out.
How I can help with your cargo insurance
I am a Great Eastern agent working with business owners in Kuala Lumpur and Selangor, including Puchong, Seri Kembangan, Serdang, Shah Alam and Klang, and I can explain things in Mandarin, English or Cantonese. Tell me your usual sales or purchase terms (FOB, CFR or CIF), what you ship and how often, and how you deliver within Malaysia. I will:
- show you which legs of the journey are your risk and which the seller or buyer already insures;
- read any insurance certificate you receive from a seller or forwarder and tell you which clauses it gives you and whether the value is enough;
- check what Great Eastern General offers for your shipments: its Marine Cargo and Freight Insurance page names importers, exporters, logistics companies, freight forwarders and manufacturers among the businesses it is for, and its general insurance page describes marine cargo as protection for goods by all modes and means of transport; for road-only deliveries I will check what can be arranged for your case;
- line up your cargo cover with the stock section of your factory or shop fire insurance and your lorry policy, so nothing is insured twice or left out;
- help you put the documents together if a shipment arrives damaged.
If what you have is already enough, I will say so. No hard selling. For the other covers a factory or shop usually needs, see business insurance for SMEs, factories and shops.
This guide is general information, not legal advice. What is covered depends on your own policy wording and schedule, and the insurer decides each claim on its facts.