War Risk Coverage for Cargo – How Does It Work?

Cargo can be exposed to a variety of risks and hazards as it moves across a diverse global supply chain. Weather, port congestion, and criminal activity have all been in the spotlight in recent years with respect to cargo movement. War and conflict, while a less common risk to shippers, are significant risks currently dominating headlines. As conflicts arise and evolve, it is important to understand how cargo insurance protects against these types of risks. 

In its simplest form, an “All Risk” cargo insurance policy protects goods in transit against physical loss or damage from an external source. Whether it is freight damaged in an overturned truck, a container falling off an ocean vessel, or an airline losing a pallet of goods during transit, cargo insurance is there to make you whole again. But within a cargo insurance policy are exclusions for certain risks. Two significant exclusions that are currently gaining significant attention are the Free of Capture & Seizure Warranty and the Strikes, Riots, & Civil Commotion Warranty, as described below:

• Free of Capture & Seizure Warranty (FCS): excludes loss or damage to cargo as a consequence of hostilities or war like operations, whether there is a declaration of war or not.
• Strikes Riots & Civil Commotion Warranty (SR&CC): excludes loss or damage to cargo resulting from strikes, riots, civil commotions, lockouts, vandalism, and sabotage, including terrorist acts and any other acts carried out for political or ideological purposes.

Here’s the good part. Although the FCS and SR&CC warranties exclude certain risks associated with war and physical conflict, most cargo insurance policies will add that coverage back into the policy with the following endorsements (coverage extensions):

• Cargo War Risk Open Policy – A separate policy within the main cargo insurance policy.
  • Extends coverage to certain risks excluded in FC&S Warranties, including capture, seizure, destruction or damage by men-of-war, piracy, arrests, restraints, detainments and other war-like operations.
  • Applies to goods in transit only and excludes ground transportation and goods stored in warehouses.
  • Coverage attaches when the goods are loaded on overseas vessels or aircrafts and ends upon discharge at destination (or 15 days after arrival at port of discharge if still on the vessel or aircraft).
  • For shipments moving through multiple ports, the coverage ends 15 days after arrival at the transshipment port.
• Strikes, Riots, & Civil Commotion Endorsement – An endorsement added to the policy.
  • Extends coverage to risks excluded in the SR&CC Warranties, including physical loss or damage caused by Strikers, locked-out workmen, or persons taking part in labor disturbances or riots or civil commotions.
  • Includes damage or loss directly caused by vandalism, sabotage, or malicious acts.
  • Covers losses caused by the act or acts of one or more persons, whether or not agents of a sovereign power, carried out for political, terroristic, or ideological purposes.
  • Damage may be accidental or intentional.

Although these endorsements reinstate coverage previously excluded, it is important to note that both endorsements usually come with a 48-hour cancellation provision, allowing the insurance company to cancel the coverage with 48 hours’ notice. This provides insurers a certain level of flexibility during these events and encourages the industry to avoid moving goods through those high-risk areas when possible.

Keeping up with the evolving landscape of trade and supply chain risk management can be difficult. As a logistics-focused cargo insurance broker, ECIB has the expertise and experience needed to ensure your supply chain is covered. Our experts are here to help you fully understand your current coverage. contact us today for a free policy review.