Insurance Cover Exceeding the LC Requirement – Is ICC (A) Acceptable When the Credit Requires Marine Risks or ICC (C)?

Introduction

Under UCP 600, banks examine whether the documents presented comply with the terms and conditions of the letter of credit. A common question is whether an insurance document is acceptable when it provides broader insurance coverage than that stipulated in the credit.

In this Q&A, Mr. Old Man explains why an insurance document evidencing Institute Cargo Clauses (A) (ICC A) complies with an LC requiring either Marine and War Risks or Institute Cargo Clauses (C) (ICC C), and why the beneficiary’s higher insurance premium is irrelevant to document examination.

Question

Dear Mr. Old Man,

Hope this email finds you well.

I would appreciate your clarification on the following queries.

Query No. 1

The LC requires the insurance to cover Marine and War Risks.

The insurance document evidences coverage under Institute Cargo Clauses (A) (ICC A) and War Risks.

Is this acceptable?

Query No. 2

The LC requires the insurance document to cover Institute Cargo Clauses (C) (ICC C) risks.

The insurance document evidences coverage under Institute Cargo Clauses (A) (ICC A).

As ICC (A) provides the widest cover and ICC (C) the minimum cover, can the document be accepted as compliant (from an export checking perspective)?

Alternatively, since the beneficiary would have paid a higher premium for ICC (A) than for ICC (C), should a discrepancy be raised?

Please clarify.

Regards,

Priya

_______

Answer

Dear Priya,

Thank you for your email. There is no need to apologize—I’m always happy to discuss trade finance questions.

Please find my comments below.

Query No. 1

Is it acceptable if an insurance document indicates Institute Cargo Clauses (A) (ICC A) and War Risks instead of Marine and War Risks as required by the LC?

Yes, it is acceptable.

An insurance document indicating coverage under Institute Cargo Clauses (A) (ICC A) and War Risks complies with the credit requirement for Marine and War Risks insurance.

ICC (A) provides the broadest level of marine cargo insurance cover under the Institute Cargo Clauses and therefore satisfies a requirement for marine risks. Since War Risks are covered separately, the insurance document complies with the LC requirement.

Query No. 2

Is it acceptable if an insurance document indicates ICC (A) instead of ICC (C) as required by the LC?

Yes, it is acceptable.

Institute Cargo Clauses (A) (ICC A) provide the broadest level of cargo insurance cover under the Institute Cargo Clauses. Since ICC (A) includes all the risks covered by Institute Cargo Clauses (C) (ICC C), an insurance document evidencing ICC (A) coverage satisfies a letter of credit requirement for ICC (C) coverage.

The fact that the beneficiary may have paid a higher premium for ICC (A) is irrelevant. Under UCP 600, banks examine documents—not the cost of obtaining them. A document providing a higher level of insurance coverage than that required by the credit is acceptable and should not be treated as discrepant.

I hope the above clarifies your queries.

Best regards,

Mr. Old Man