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Cargo Insurance as a Necessity: The Illusion of Security and the Real Limits of Carrier Liability
Carrier liability limits are based on weight, not value — leaving up to 99% of your cargo loss uncovered. In 2026, cargo insurance (ICC "A") and parametric smart contract policies are no longer optional; they are essential for trade finance, General Average protection, and supply chain resilience.
The volume of international trade continued to grow actively in 2026. This is according to the DHL Global Connectedness Report 2026 — an annual analytical report published by DHL in collaboration with NYU Stern School of Business. Globalization has reached record levels and remains at that level, while goods trade growth in 2025 was the fastest since 2017.
However, this growth is accompanied by new risks. The World Economic Forum (WEF) notes that supply chains have entered an era of structural volatility, where geopolitical instability and market fragmentation have become permanent factors.
The Trap of International Conventions: Weight Instead of Value
More than 40% of mid-sized companies make the same mistake: they do not insure their cargo, assuming that in the event of loss, the transport company will reimburse the full value. According to survey data, 91% of respondents engaged in foreign trade experience insured events several times a year. Global supply chain disruptions cost businesses $184 billion annually.
However, the liability of a forwarder or shipping line is strictly limited by international conventions. It is calculated not from the value of the cargo, but from its weight — using the SDR (Special Drawing Rights) coefficient. This is a special unit of account used by the International Monetary Fund. In 2026, the SDR exchange rate is approximately $1.30–1.40.
Under the CMR Convention (road transport), the limit is 8.33 SDR per kg — about $11–12. Under the Hague-Visby Rules (maritime) — 2 SDR per kg ($2.70). For air transport — 17–25 SDR per kg ($23–34).
Example: A container of electronics weighing 2 tonnes and valued at $500,000 is shipped by sea. In the event of total loss, the carrier would pay about $5,000 (calculated as: 2 tonnes × 2 SDR × $1.30). The remaining $495,000 difference falls on the cargo owner's balance sheet. For the owner of high-value equipment, this means a loss of up to 99% of capital in the event of an incident, creating a massive cash flow gap.
Consequently, the cargo insurance market in 2026 is valued at nearly $61 billion and is growing at more than 6% per year.
Exemption from Liability and General Average
In 2026, logistics operators are actively invoking force majeure to exempt themselves from liability. This includes acts of God, acts of war, and port worker strikes. For example, the closure of the Strait of Hormuz in 2026 resulted in 42 container vessels from major global lines being trapped in the Persian Gulf. This is one of the largest accumulations of ships in modern history, caused by military conflict.
Carriers officially acknowledge infrastructure constraints and force majeure circumstances as causes of cargo transshipment disruptions. In such cases, international conventions completely exempt the carrier from any obligation to compensate losses.
There is also the risk of General Average. This is an ancient maritime law, still actively applied today: all costs for salvage of the vessel are shared proportionally among the owners of surviving cargo.
Example — the incident with the container ship Dali, which destroyed a bridge in Baltimore in March 2024. The vessel owner, Singapore-based Grace Ocean Private Ltd., declared General Average, requiring cargo owners on board (approximately 4,000 containers) to cover part of the costs of raising the sunken vessel.
Without a cargo insurance policy, the importer is obliged to pay their share of the contribution; otherwise, their surviving cargo will be arrested by the port until a guarantee deposit is provided. This is a direct threat to the company's working capital.
In 2026, the scale of maritime risks is increasing. In the first half of the year alone, economic losses from natural catastrophes amounted to $111 billion. Losses from 23 events with damages of $1 billion each confirm that supply chain damage has become systemic. This information is contained in a report by insurance broker Aon.
Cargo Insurance (ICC "A") and Parametric Triggers in 2026
In the current situation, insurance becomes an inevitable solution. It is most often arranged under the Institute Cargo Clauses — the international standard for marine cargo insurance developed by the London insurance market.
The best protection for the supplier's interests is provided by cargo insurance under ICC "A". It covers losses "from door to door" at 110% of the invoice value of the cargo, including expected profit. According to Incoterms 2020, this is the standard for CIP (Carriage and Insurance Paid To) terms, where the seller is obliged to provide exactly this level of cover for the cargo.
The cost of an ICC "A" policy is typically 0.3–0.8% of the cargo value. For comparison, ICC "B" policies cost 0.2–0.5%, and ICC "C" — 0.1–0.3%. However, they do not provide cover against all risks.
An alternative is parametric insurance on smart contracts. This is a model where payout occurs automatically (T+0) upon the occurrence of a pre-agreed event. Policies integrate with IoT sensors (temperature, humidity, shock). When transport conditions are breached, the smart contract initiates payment without human intervention.
The main advantage of this model is speed. According to Chainscore Labs, automation reduces claims settlement time from 30–90 days to 24 hours, and claim processing costs drop from $45–75 to $5–15. As a result, the parametric insurance market is growing:
in 2025 it was valued at $11 billion;
in 2026 it reaches $13 billion;
by 2030 it is forecast at $21 billion.
In some scenarios, parametric insurance is cheaper than traditional insurance, since classical policies have higher operational expenses — surveyor visits, document verification, negotiations. This makes parametric solutions effective for managing specific risks in supply chains.
| Criteria | Carrier Liability (CMR / Bill of Lading) | Cargo Insurance Policy (ICC "A") |
|---|---|---|
| Basis for compensation calculation | Cargo weight (SDR/kg) | Full invoice value + 10% |
| Payouts in case of force majeure | None (exemption from liability) | Covered (unless excluded by policy) |
| Protection against General Average | None | Covered |
| Reimbursement of lost profit (110%) | No | Yes |
| Settlement speed | Months–years (litigation) | Days–weeks (surveyor) / T+0 (parametric) |
Conclusions for CFOs and Chief Risk Officers (Executive Summary)
The cost of cargo insurance (fractions of a percent of the invoice) is incomparable to the risks of total liquidity loss. In 2026, digital policies embedded in smart contracts have transformed insurance from an "unnecessary cost item" into a mandatory condition for obtaining trade finance. Without insurance, banks will not provide funding for a transaction.
FAQ: Frequently Asked Questions
Who should buy the cargo policy: the seller or the buyer?
This depends exclusively on the chosen Incoterms delivery basis. Under CIF/CIP, the seller pays for insurance and includes the cost in the goods price. Under FOB/EXW, the buyer must arrange insurance independently.
Is the carrier's liability invalidated if it is proven that the damage was caused by intentional acts of its employees?
No. In that case, the carrier loses the right to limit liability under international conventions, and the full amount of damages can be recovered through court proceedings.
Does the freight forwarder's liability insurance (TTL) replace the insurance policy for the cargo itself?
No. TTL (Through Transport Liability) covers the forwarder's liability for errors in organizing transport, but does not insure the cargo itself against damage or loss.
