Cargo Insurance Case Study

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1. Risk and “cargo” insurance Risk is the chance certain negative events to be realized and to cause partial or complete damage of the cargo. The cargo could be transported by land, water, and air or combined and transportation risks refer to natural disasters, cargo operation accidents, vehicle collisions, actions from outsiders, etc. Apart from these, there are other factors related to the way of transportation or in other words the nature of the cargo, such as type of packing, loading, arranging, etc. 2. Insurance coverage "Cargo" insurance aims to cover damages and destruction of any goods such as commodities, objects, animals, valuable items, as well as all related material interests: vessels, aircrafts, motor vehicles, railways, and…show more content…
These features of "cargo" insurance refer to four types of insurance clauses: • Institute Cargo Clauses - it includes all risks; • Institute Cargo Clauses A – it covers all possible risks of losses or damages of the cargo caused by fire, explosion, accident, natural disaster, and theft. However, it does not include risks which refer to wars, political riots, strikes, bankruptcy, intentionally actions or inactions of the insured, as well as losses caused by inadequate or inappropriate packaging or unsuitable vehicle. • Institute Cargo Clause B – it has limited coverage. This clause includes risks against fire and natural disasters, such as earthquakes and floods as well as soaking, sea or river water in the container. In addition, it can cover partial or complete loss of a package of the cargo. However, insurance companies claim that clients rarely purchase it. • Institute Cargo Clauses C – it has basic or minimum coverage. Clause C is specialized and covers only fires, explosions, vehicle accidents and total loss. It insures commodities in bulk, for instance, wheat, corn,…show more content…
The stagnation in EU, the low export and the financial difficulties have a negative impact on this type of insurance and hamper its further development. Moreover, “cargo” insurance, on the territory of Bulgaria, is not yet sufficiently developed and it is not very popular among the local companies. The negative foreign trade balance is also an issue, as the gross income of insurance companies does not increase from imports, but from exports. For example, an exporting commercial company from the Netherlands would prefer to insure its cargo on the Dutch market. There are, also, many international deals where the importers request their EU partners to provide an insurance for the cargo to the final destination in the country. As a result, part of the potential income for the local insurance market remains in the countries with which the Bulgarian importing companies trade. Furthermore, "cargo" insurance is not mandatory and people in Bulgaria do not have the attitude and the culture to insure their property. Thus, most of the merchants and manufacturers believe that it is not necessary to spend part of their budget on “cargo” insurance and most of the imported and exported goods remain without coverage. Interest arises only when a certain risk is realized and it brings large size

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