Letter of Credit (L/C) is often used for international purchase and sale transactions. In this case the exporter must submit insurance policy in the prescribed format for it to be accepted by the bank. The insurance policy must strictly comply with the terms of the L/C.
Among such terms are:
– the number of insurance policy originals must be compliant to the number specified in the Letter of Credit terms (each original is numbered);
– the currency of the policy must be the same as the currency of the L/C;
– insurance company issuing the policy must have international rating (if such condition is provided for in the L/C);
– the policy must cover insurance risks, required under the terms of the L/C;
– the date of the policy issue must be relevant to the date of the goods shipment specified in the Bill of Lading or other shipping document;
– the policy must cover the amount relevant to the terms of the L/C;
– other conditions.
It is necessary to bear in mind, that tough requirements imposed onthe letter of credit for cargo insurance policies may be different from the conditions some insurers are ready to apply when insuring cargoes. Thus, it is critically important for exporters to only work with such insurance companies that are flexible enough in providing this category of policies.
Depending on the terms of the foreign trade contract, cargo insurance policy for bank L/C is usually drafted under the following conditions:
— Institute Cargo Clauses (A), (B), (C);
— Institute FOSFA Trades Clauses;
— GAFTA № 72;
— Institute Bulk Oil Clauses;
— Institute Coal Clauses, etc.
Additional coverage may include Institute War Clauses and Institute Strikes Clauses.
Insurance consultants at Polaris have a vast experience in drafting cargo insurance policies for bank L/C. We cooperate with field-specific departments of cargo transportation insurance of the leading insurance companies. We can help you to promptly obtain insurance policy for the L/C, fully compliant with the requirements of your bank. Feel free to approach us for help in obtaining insurance policy for bank L/C by e-mail: firstname.lastname@example.org