The Red Sea is located between Africa and the Middle East and connects the Indian Ocean to the Suez Canal and Mediterranean Sea. It is a vital stretch of water for world trade with an estimated 15% of world trade passing through these waters.

With the current conflict in the region, many ship owners have had to reconsider this route as insurers have cancelled insurance coverage.

The following article from one of our partners – NM Insurance highlights what cancellation provisions are applicable in marine insurance, how insurers are likely to cancel coverage, the insurance law that is relevant and on what basis may an insurer cancel cover.

Uncover Cargo Insurance and cancellation clauses.
Whilst not commonly known, given the context of the current global environment this is a great aspect of Cargo Insurance to review and understand, Cancellation Clauses.



What are they?
Marine insurers are entitled to cancel cover, either in whole or in part, and are given much more freedom to do so than would otherwise exist with general insurance policies.

While cancellation clauses are rarely invoked, brokers should be aware of the potential for insurers to cancel their clients’ cover.

Key Points

  • Marine insurance policies can be cancelled by the insurer for any reason.
  • Cancellation provisions exist specifically for war risks
  • Brokers are reminded to let clients know about excluded countries/regions in ‘worldwide’ marine cargo policies.

The insurance legislation

Contracts of marine insurance covering cargo in transit overseas are governed by the Marine Insurance Act 1909. An important distinction between this Act and the Insurance Contracts Act (which governs general insurance) is that the Marine Insurance Act is largely silent on the subject of cancellation, which means that the cancellation provisions are defined in each insurers’ policy wording.

This of course contrasts with the Insurance Contracts Act where insurers are only permitted to cancel cover in very limited circumstances (fraudulent non-disclosure etc).

Why do marine insurers cancel cover?
Given the potential for international relations to quickly change, particularly conflicts such as we are now seeing around the world, insurers need to be able to amend their cover to withdraw insurance for certain risks from time to time. What was considered a medium risk area yesterday may become entirely uninsurable today due to the outbreak of conflict. It is understandable that marine insurers would choose to withdraw insurance coverage for those areas.

Cancellation provisions
Cancellation provisions are detailed in the insurance policy and generally provide for cancellation in various scenarios.

In the context of annual cargo insurance, the cancellation provisions for most insurers will be:

  • 30 days for any reason other than below
  • War – 7 days other than USA, which is 2 days
  • Strikes, riots, civil commotions – 7 days, other than USA which is 48 hours

Although it is extremely rarely done, insurers are entitled to give 30 days’ notice of cancellation without reason.


War risks

A cancellation provision common to marine insurance policies is for war risks. Cover for war risks is provided by the various Institute Clauses that form part of the policy wording.

Insurance policies will generally contain the Institute War Cancellation Clause (Cargo) which provides for 7 days’ notice of cancellation of cover for war risks.

Importantly, the cancellation only applies to transits that have not yet commenced and any transit that is underway is exempt from the cancellation.


World may not mean world

When insurers provide cover for overseas transits on a worldwide basis it is common for their policy (generally detailed in the schedule) to exclude certain countries and regions. The risk of war, civil commotion and poor infrastructure is simply too high in certain areas for cover to automatically extend to them.

Also, due to trade sanctions it may be illegal for companies to trade with those sanctioned countries.



Policy covers exports anywhere in the world and a war erupts in Europe.
Insurers will write to policy holders giving 7 days’ notice of cancellation for war risks and then immediately reinstate the cover but excluding cover for Europe.

Alternatively, insurers may reinstate cover for war risks for an additional premium but may limit the cover such that insurance terminates upon discharge of the cargo at the arrival port (i.e. no inland transit cover at the overseas destination).

Hence, if you need help understanding your policy, call our marine team on 1300 500 700.

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