Cancellation Clauses

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


What are they?
Marine insurers are entitled to cancel cover, either in whole or in part, and are givenmuch more freedom to do so than would otherwise exist with general insurancepolicies. While cancellation clauses are rarely invoked, brokers should be aware of thepotential for insurers to cancel their clients’ cover.

Key Points

  1. Marine insurance policies can be cancelled by the insurer for any reason.
  2. Cancellation provisions exist specifically for war risks
  3. 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 bythe Marine Insurance Act 1909. An important distinction between this Act and theInsurance Contracts Act (which governs general insurance) is that the MarineInsurance Act is largely silent on the subject of cancellation, which means that thecancellation provisions are defined in each insurers’ policy wording.

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

Why do marine insurers cancel cover?

Given the potential for international relations to quickly change, particularly conflictssuch as we are now seeing around the world, insurers need to be able to amendtheir cover to withdraw insurance for certain risks from time to time. What yesterdaywas a medium risk area may be completely uninsurable today due to conflictbreaking out. It is reasonable that marine insurers will want to retract insurancecover for those areas.

Cancellation provisions

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

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

  1. 30 days for any reason other than below
  2. War – 7 days other than USA, which is 2 days
  3. 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 ofcancellation without reason.

War risks

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

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 commencedand 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 iscommon for their policy (generally detailed in the schedule) to exclude certaincountries and regions. The risk of war, civil commotion and poor infrastructure issimply 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 thosesanctioned 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 risksand then immediately reinstate the cover but excluding cover for Europe.

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

Trust the Marine Specialists

Proteus Marine Insurance risk appetite specialises in:

  • Single and Annual Cargo
  • Carriers Cargo & Carriers Cargo Liability
  • Commercial Hull
  • Marine General Liability