Insurance wrappers
How insurance wrappers protect a trade.
Three ordinary ideas: the buyer might not pay, the cargo might not arrive intact, and the country might get in the way. Each one has a kind of insurance. None of them replaces a contract, an inspection, or a buyer who can pay.
The three covers
One risk, one job.
01
Trade credit insurance
Protects the seller if the buyer does not pay.
You have sold the cargo. The buyer has it, or has agreed to take it, and the invoice is outstanding. Trade credit insurance is there if that buyer fails to pay — typically because they are insolvent or because they simply do not pay for a long time. It protects the seller, or a lender who has financed the seller’s invoice. It does not insure the ship, and it does not insure a government blocking the currency.
02
Cargo and marine insurance
Protects against loss or damage while the goods are on the move.
This is the cover for the physical cargo: lost overboard, damaged in a storm, stolen, or spoiled. Who buys it is a contract question. Under FOB, risk usually passes to the buyer once the goods are on the ship, so the buyer normally buys the marine insurance from that point. Under CIF, the seller buys cargo insurance for the voyage and builds that cost into the price. The policy wording decides the exact moment cover starts and ends. The three-letter Incoterm is the usual signal, not a substitute for reading the clause.
03
Political risk insurance
Protects against the country, not against a weak balance sheet.
The buyer may be willing and able to pay, and the cargo may be intact, and the deal can still fail because of the state. The covers people mean by political risk are: expropriation, when a government takes the goods or the investment; currency inconvertibility and transfer restrictions, when local money cannot be turned into dollars or sent out; political violence and unrest, when war, riot, or civil disturbance damages the goods or stops performance; and contract frustration, when a government party walks away from its contract, or a government act makes a contract impossible to perform. It is a country cover. It is not a substitute for checking that the buyer can pay.
Tolling and offtake
The same cargo, several promises.
A Caribbean tolling deal and the offtake that follows it are two different promises, even when they use the same molecules. In tolling, you keep ownership of the material and pay a plant to process it. In the offtake, someone agrees to buy the finished product and pay you later.
Cargo insurance follows the goods: into the plant, if the policy is extended ashore, and out again on the ship. Political risk follows the country the goods are sitting in, including the risk that they cannot be re-exported. Trade credit follows the party that owes money. That is often the distributor who buys the finished diesel, not the refinery that charged a tolling fee — unless the fee itself is what you are waiting to be paid.
The policies do not replace the tolling clause that says the feed still belongs to you. They sit on top of it.
Step 1
Contract
The tolling terms and the offtake are signed. Credit and political-risk cover are tied to that buyer and that country.
- Trade credit
- Political risk
Step 2
Loading
Cargo insurance usually starts when the goods go on board. FOB: the buyer arranges it. CIF: the seller does, and the price includes it.
- Trade credit
- Cargo / marine
- Political risk
Step 3
Voyage
Marine cover is there for loss or damage on the water. Political violence cover can matter if unrest hits the ship or the port.
- Trade credit
- Cargo / marine
- Political risk
Step 4
Delivery
Cargo cover normally ends where the policy says it ends. Inspection fixes quantity and quality, and the invoice starts the time allowed to pay.
- Trade credit
- Cargo / marine
- Political risk
Step 5
Payment
Trade credit responds if the buyer does not pay. Political risk responds if the money is there but cannot be converted or sent.
- Trade credit
- Political risk
Worked example
Hypothetical numbers. Not a quotation.
Every figure below was invented to show how the layers add up. Insurers set their own rates, limits, and exclusions. A real premium can be far from these.
A trader owns feedstock and tolls it at a Caribbean plant. The tolling fee is USD 350,000. The finished diesel — 8,000 tonnes — is sold to a regional distributor for USD 6,400,000, payable 30 days after the bill of lading. The offtake is FOB the load port, so the distributor buys the marine insurance from loading.
The inbound feedstock, had it moved CIF, would have been insured by the feed owner instead. Same cargo, opposite person buying the marine policy, because the Incoterm changed.
| Layer | Illustrative insured amount | Invented premium |
|---|---|---|
| Trade credit, 90% of the invoice | USD 5,760,000 | USD 48,960 |
| Cargo, 110% of the invoice, bought by the FOB buyer | USD 7,040,000 | USD 8,448 |
| Political risk, transfer and political violence | USD 6,400,000 | USD 70,400 |
| Invented total | Not a single policy | USD 127,808 |
The 10% the trade-credit example leaves with the seller is USD 640,000. That share, the waiting period, and any deductible on the cargo policy are not covered by the other layers. The tolling fee is not in the trade-credit line: nobody in this story insured the plant’s invoice.
Questions
Short answers.
- Does trade credit insurance mean I will be paid in full?
- No. The insurer usually leaves part of the loss with you, and it pays only for the causes named in the policy, often after a waiting period. A limit, an exclusion, or a late claim can all reduce what you receive.
- Who buys the cargo insurance, the buyer or the seller?
- The sale contract decides. Under FOB, the buyer normally arranges marine insurance from the point the goods are loaded. Under CIF, the seller buys that insurance and includes the cost in the price. The policy, not the Incoterm abbreviation alone, says where cover starts and stops.
- Is political risk the same thing as the buyer going out of business?
- No. Trade credit is about the buyer: they cannot or will not pay. Political risk is about the country: the state takes the asset, blocks conversion or transfer of the money, or violence or unrest stops the contract from being performed.
- Can one stack of policies cover both a toll and the later sale?
- Often they are separate promises. Cargo and political-risk cover can follow feedstock into a plant and finished product back out, if the wording says so. Trade credit usually sits on the party that owes the money — commonly the offtaker of the finished goods, not the toller, unless the tolling fee itself is the credit risk.
- Does a broker listed on this page guarantee cover?
- No. A name here means we work with that brokerage. It is not an endorsement, and it does not say what any insurer will agree to cover or what it will cost.
Brokers we work with
The firms, not the policies.
A name here means we work with that brokerage. It is not an endorsement, and it does not describe what any policy covers. To add a firm, add an entry in the broker list. Leave the logo blank until there is permission to show it.
- BB
Specialties. Insurance brokerage
Regions. United States
Finance partners & accepted banks
- The Praderia Group
- HSBC
- J.P. Morgan
- Texas Capital
- Ryan Tax Capital
Names are shown for reference. They do not imply an endorsement, a banking relationship, or that any instrument will be issued.
Markets we serve
- Jamaica
- Trinidad & Tobago
- Guyana
- Suriname
- Honduras
- Barbados
- The Bahamas
- Dominican Republic
- Eastern Caribbean (OECS)
- Montserrat
- United States: Gulf Coast
Shown for reference; does not imply endorsement.
Related: Private credit and insurance wrappers · Tolling agreements · Feedstock and offtake · Trade Finance Facilitation Program
Enquiries
Ask how a cover would sit on a real cargo.
We will tell you which risks look insurable and which still sit with you. We do not bind policies.