Insurance Certificate “To Order” and Blank Endorsement: Is the Absence of a Named Assured a Discrepancy?

Intro

Questions surrounding insurance documents remain one of the most frequent sources of discrepancy under documentary credits.
One recurring issue is whether an insurance certificate showing the assured as “to order” – and endorsed by a party other than the beneficiary – is acceptable when the credit does not name an assured.

The following case highlights how ISBP 821 and ICC opinions clarify this point.

Question

Dear Mr. Old Man,

A letter of credit requires:

Insurance policy or certificate in duplicate, blank endorsed for 110% of the invoice value, covering ICC (A).

The presented document is an insurance certificate with the following features:

• The assured is stated as “to order”
• The document is blank endorsed
• The endorsement is made by a third party (neither the beneficiary nor the shipper)
• No other assured party is named
• No “claims payable to” clause identifies any party

The credit is silent as to the identity of the assured.

Questions:

1. Is the insurance certificate acceptable?
2. Must the insurance document show a specifically named assured when the credit does not require one?

Best regards,

Rohini Mehta

______

Answer

Dear Rohini,

Thank you for your question.

It is not unusual in international trade for the beneficiary under a credit to be a trader who neither ships the goods nor arranges the insurance. This may explain why the party endorsing the insurance certificate is neither the beneficiary nor the shipper.

1. “To order” insurance and blank endorsement

ISBP 821 K20 states that a credit should not require an insurance document to be issued “to bearer” or “to order”. However, this is a recommendation, not a prohibition.

Where a credit nevertheless requires a blank endorsed insurance document, an insurance certificate issued “to order” is not in itself discrepant, provided it is endorsed as required.

This position is clearly supported by ICC Opinion R778 / TA.688rev, which analysed six different structures of insurance documents, including those issued “to bearer” and “to order”. The opinion confirms that such structures are structurally acceptable, and that endorsement is required only where a named party must transfer rights.

The opinion further clarifies that endorsement is a mechanism to transfer rights, rather than a strict requirement to identify the assured.

2. Absence of a named assured party

ISBP 821 K21 provides:

“When a credit is silent as to the insured party, an insurance document is not required to evidence that claims are payable to the order of, or in favour of, the beneficiary or any entity other than the issuing bank or applicant, unless it is endorsed by the beneficiary or that entity in blank or in favour of the issuing bank or applicant.”

In this case:

• The credit does not specify an assured
• The insurance certificate shows “to order”
• It is blank endorsed as required
• No conflicting claims payable to party is stated

Accordingly, the absence of a specifically named assured does not render the insurance certificate discrepant.

Conclusion

Although ICC and ISBP discourage the use of “to order” or “to bearer” insurance structures as a matter of best practice (ISBP 821 K20), their use does not of itself create a discrepancy.

Where the credit is silent as to the assured and the insurance certificate is issued “to order” and blank endorsed as required, the document is acceptable.

Kind regards,

Mr. Old Man