What does “Insurance in Negotiable Form” mean?

The joys of LC compliance—where even your insurance document can make or break a negotiation. In today’s Q&A, a reader preparing documents for LC negotiation stumbles upon a classic trade finance brain teaser: What exactly is an “Insurance Policy in Negotiable Form endorsed in blank”?

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Is it about bearer documents? Is there an endorsement ceremony involved? Or is it just more legalese trying to trip us up?

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Let’s unpack this one, clause by clause—with Mr. Old Man’s usual dose of clarity (and maybe a little sympathy for those wrestling with shipping docs at midnight).

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Read on:

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Could you kindly advise what this LC requirement means for the insurance document?

INSURANCE POLICY/CERTIFICATE IN NEGOTIABLE FORM ENDORSED IN BLANK FOR 100 PCT OF INVOICE VALUE. INDICATING THAT THE INSURANCE IS ISSUED IRRESPECTIVE OF ANY DEDUCTABLE EITHER OF VALUE OR PERCENTAGE, SHOWING CLAIMS PAYABLE IN SAUDI ARABIA COVERING THE FOLLOWING RISKS FROM WAREHOUSE TO WAREHOUSE: MARINE RISKS AS INSTITUTE’S CARGO CLAUSES ‘A’ INCLUDING WAR RISKS AND RISKS UNDER STRIKES, RIOTS AND CIVIL COMMOTIONS.

Does it mean that the insurance document is issued to order and then the insured party signs it?

Thank you.

Best regards,

Xueyuan

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ANSWER

Hi Xueyuan,

Thank you for your kind words and for using my website as a reference. I’m glad to hear it’s been helpful in your work.

Regarding your question about the insurance document requirement:

The LC asks for an insurance policy or certificate that is in assignable form, endorsed in blank, for 100% of the invoice value, and covering specific risks from warehouse to warehouse.

A few clarifications:

• “Negotiable form” in this context actually refers to an assignable insurance document, meaning it is either issued in the name of the beneficiary and endorsed in blank, or otherwise transferrable to another party.
• According to ISBP 821 paragraph K20(a), an LC should not require insurance documents to be issued “to bearer” or “to order”. It should name the insured party (typically the LC beneficiary).
• To comply, the insurance policy/certificate should:
  • Indicate the beneficiary as the assured party
  • Be endorsed in blank on the reverse by the beneficiary. This endorsement transfers the right to receive payment under the insurance to whoever presents the document (typically the applicant or issuing bank).
• Also, the insurance document must state:
  • That it covers 100% of the invoice value
  • That claims are payable in Saudi Arabia
  • That it is issued irrespective of any deductible
  • That it covers the listed risks: ICC (A) + war risks + strikes, riots, and civil commotions (SRCC), and the full transit (warehouse to warehouse).

I hope this clears things up. And yes – endorsement means the beneficiary signs the reverse side of the insurance document to transfer rights.

Best regards,

Mr. Old Man