by Hariesh Manaadiar, Founder at Shipping and Freight Resource and Features Editor – OceanFreight at CargoNOW
The invisible lifeline of trade Insurance is often acknowledged as a grudge purchase, whether it relates to movable assets or to cargo. It is seen as a footnote in the vast documentation that accompanies a global shipment.
From smartphones to steel coils, from frozen shrimp to life-saving pharmaceuticals, trillions of dollars’ worth of cargo moves daily, each with an inherent risk. One storm, one crane collapse, one blocked canal, or one moment of geopolitical friction can send ripple effects across global supply chains and balance sheets.
And yet, many companies treat cargo insurance as an afterthought or, worse, assume someone else has it covered.
Spoiler: they often do not. According to Allianz’s Safety & Shipping Review, insured losses are often only a fraction of actual cargo losses, as many policies either do not apply or are misunderstood.
What can (and does) go wrong Let us start with reality. The World Shipping Council’s 2024 report noted that an average of 2,500 containers are lost at sea every year. Maritime disasters, like those involving the MSC Flaminia, Maersk Honam, and Xpress Pearl, to name a few, have become disturbingly regular.
Then there’s theft, pilferage at ports, misrouting, war risks in places like the Red Sea, and port congestion leading to temperature-sensitive cargo spoilage. Whether it’s the surge in inland hijackings targeting container trucks in South Africa, seasonal typhoons that routinely disrupt sailings across Southeast Asia, violent cargo thefts by organised crime syndicates exploiting weak security protocols in South America, or the rise of fictitious pickups in Europe—where criminals impersonate legitimate drivers to steal high-value goods—such incidents significantly heighten the risks of cargo damage, delay, and deviation.
But here is the kicker: most cargo insurance policies are not automatically embedded into the transport contracts. Shippers, consignees, freight forwarders, and carriers play a dangerous game of assumptions, often leading to denied claims or prolonged settlements.
And contrary to popular belief, carrier liability under conventions like Hague-Visby or COGSA is often minimal— capped per kilogram or per package. In many loss events, carriers are not even liable at all. A typical international shipment may be worth USD 500,000, but carrier liability might only cover USD 1,000.
Types of coverage and common gaps Most insurance options fall into two buckets:
• All-Risk Policies – The gold standard, but often misunderstood and misapplied. • Named Peril Policies – Limited coverage based on listed risks like fire, theft, or sinking.
Then there are the dangerous assumptions baked into commercial terms. Incoterms® rules DDP suggest insurance coverage is not obligatory for either party, but who should take the cover and for which parts, etc.?
The result is a no-man’s land where: • The buyer thinks the seller insured it. • The forwarder thinks the shipper did. • The insurer says the claim was not triggered.
And the cargo? It is lost, unpaid for, and sitting in the middle of a blame storm. Additionally, there is a growing lack of clarity around liability in multimodal transport. If a container is damaged on rail in India, transhipped at Singapore, and discovered only at arrival in Rotterdam—who bears the loss, and under which country’s insurance law? Often, nobody has a clear answer.
New frontiers in cargo risk management But the landscape is shifting. As freight digitisation picks up steam, so too is the insurance sector undergoing its own transformation. A few key trends are shaping this new frontier:
Integrated Insurance Access: Many digital freight and logistics platforms now provide the ability to opt in for cargo insurance through embedded interfaces, typically in partnership with third-party providers. While these platforms do not underwrite insurance themselves, they simplify the process by enabling instant access to coverage during booking—often supported by digital documentation and automated claims workflows.
• Parametric Insurance: This innovation ties insurance payouts to predefined, verifiable events—such as temperature excursions, shipment delays, or route deviations—captured through IoT sensors or APIs. By removing the need for manual claims assessment, parametric policies enable faster, more transparent settlements, particularly for time-sensitive or perishable cargo.
• Blockchain and Smart Contracts: Blockchain technology is being adopted to secure and streamline various stages of the cargo insurance value chain—from risk assessment and policy issuance to claims validation and automated settlement— enhancing transparency and trust across all stakeholders.
• On-Demand Micro-Policies: Some insurance models now support single-shipment or commodity-specific coverage, tailored to individual voyages or highvalue goods. These flexible, short-term policies lower barriers for SMEs and enable cost-effective protection based on real-time shipment variables.
The Digital Risk dashboard The digitalisation of risk is not just about buying insurance online. It is about holistic risk visibility:
• IoT sensors now monitor shock, tilt, temperature, and GPS in real time.
• AI algorithms calculate risk profiles based on route, commodity, weather, and even port efficiency.
• Predictive analytics now warn of higher-risk transits, giving shippers a chance to reroute or boost coverage.
• APIs enable freight platforms to send real-time shipment data to insurers, helping underwrite smarter and process claims faster.
In short, the risk profile of a shipment is no longer static; it evolves in real time, and insurers are catching up.
Case Snapshot: Claim Nightmares & Digital Triumphs 1. Perishable Goods: Rapid claim settlement for seafood shipment A seafood exporter faced a situation where a shipment of fresh cod experienced a temperature excursion due to a flight delay. Utilising IoT sensors, the temperature breach was detected in realtime, triggering a parametric insurance claim. The claim was settled in under 8 hours, allowing the exporter to mitigate financial losses promptly.
2. Floral Exports: Protecting time-sensitive shipments A flower exporter in Colombia insured a 5-tonne shipment of roses destined for Miami. A severe storm caused a 14-hour flight delay, surpassing the 12-hour threshold of their parametric policy. The insurance claim was automatically triggered and settled within 24 hours, covering the $100,000 loss due to the delay.
3. Aviation Parts: Ensuring operational continuity An aircraft manufacturer shipped a critical engine part from Paris to London. A predeparture equipment failure led to a 16-hour delay. With a parametric insurance policy in place, the manufacturer received a $100,000 payout within 24 hours, offsetting the expedited shipping costs and maintaining client satisfaction.
Climate Change and the New Insurance Imperative The climate crisis is already rewriting the rules of cargo insurance. More frequent hurricanes, flooding in lowlying port cities, and rising sea temperatures are all introducing new variables for underwriters.
According to the Swiss Re Institute’s sigma 1/2024 report, global insured losses from natural catastrophes in 2023 totalled USD 108 billion. This figure marks the fourth consecutive year where insured losses have exceeded USD 100 billion, highlighting the increasing financial impact of natural disasters on the insurance industry.
That is pushing insurers to rethink premium calculations and risk zones. Cargo insurance premiums may rise not just because of location, but due to timing, vessel age, and seasonal weather forecasts.
Shippers will increasingly need climate-linked coverage and climate-adjusted transit planning.
A call for industry alignment Here is where it gets interesting. The move towards digital trade documents—like the electronic bill of lading (eBL)—has implications for insurance too. If trade documentation is digitised, why are we still submitting physical evidence for insurance claims? If platforms like DCSA, GSBN, and ICC are digitising the transport stack, insurers must plug into that same ecosystem.
We need: • Shared standards between digital logistics platforms and underwriters. • Mutual recognition of digital documents across insurers, ports, and customs. • Alignment on parametric triggers and data validation.
Banks, trade finance institutions, and customs authorities should be looped in as well. After all, many claim disputes arise from missing or mismatched documents at border control or LC settlement.
Conclusion: from reactive cover to predictive protection Cargo insurance is evolving from a fallback safety net to an active part of freight risk strategy.
In today’s world, where disruptions are no longer the exception, businesses cannot afford to rely on 20th-century models to protect 21st-century trade. They need real-time cover, automated protection, and data-validated decisions.
As AI and blockchain redefine how we calculate, manage, and mitigate risk, the cargo insurance of 2030 may look more like a smart contract suite than a static PDF policy. And in that future, companies that fail to adapt will not only be uncovered—they will be outmanoeuvred.
The digital transformation of cargo insurance is not simply good practice—it is a competitive advantage. Because in global trade, risk is everywhere. But so is opportunity—if you are covered.
About the Author
Hariesh Manaadiar
Hariesh Manaadiar is a subject matter expert in the field of shipping, freight, logistics and trade active in the industry for over 35 years. Hariesh shares his knowledge and experience through his Shipping and Freight Resource which he founded in 2008. He has a Masters in Shipping and Logistics, is a Fellow of the Institute of Chartered Shipbrokers, qualified in Digital Trade Strategy and Digital Supply Chain Management and holds a Diploma from the London School of Journalism.
