Deck 10: International Insurance

Question 1

While it is difficult to obtain,some insurers will write policies covering losses from nuclear war.

Answer 1

False

Question 2

At the time a ship is stranded,its cargo usually suffers heavy damage.

Answer 2

False

Question 3

Hull insurance does not cover the owner's liability toward the cargo owners in the case of a general average.

Answer 3

False

Question 4

It is rare for cargo to fall overboard from ships.

Question 5

The three ways companies can manage risk are through risk retention,risk amalgamation,and through a mixed approach.

Question 6

It is not possible for a shipper to insure its cargo against war damages.

Question 7

Warehouse-to-Warehouse coverage is an extension to the traditional All Risks,With Average,and Free of Particular Average policies.It is an integral part of the Institute Marine Cargo Clause policies for Coverages A,B,and C,for which it is called "Transit" clause.

Question 8

A "With Average" policy does not cover any losses from loading and unloading of the vessel.

Question 9

Air cargo can be damaged during flight because cargo pilots do not maneuver or fly as gently as passenger pilots do.

Question 10

If an exporter in a developing country sells to an importer in a developed country on a CIF,the responsibility transfers from exporter to importer at the ship's rail.If there is then a loss,the exporter may suffer a cash flow problem while filing the insurance claim.

Question 11

Most piracy occurs near Northwest Asia.

Question 12

Lloyd's of London is the oldest insurance company in the history of shipping.

Question 13

It is possible to find insurance for improper packing.

Question 14

For Institute Marine Cargo Clauses Coverage B,losses due to bad weather are not covered.

Question 15

One of the most complex areas of international logistics is international insurance.

Question 16

Modern shipping methods mean that container cargo is rarely damaged by water.

Question 17

British "All Risks" policies and American "All Risks" policies are different from each other.

Question 18

The Institute Marine Cargo Clauses Coverage A,B,and C are governed by British law.

Question 19

The concept of general average is exclusively used in marine insurance.

Question 20

A P&I club is a mutual form of insurance.

Question 21

Dangerous cargo can only travel by ocean,not by air.

Question 22

Most air cargo policies are not included in the open cargo policy of a firm.

Question 23

Ordinary leakage is of more concern in air transit than in ocean transit.

Question 24

The correct calculation of an insurance premium relies upon the determination of the expected monetary value of claims (their probability multiplied by their expected costs)multiplied by the number of policyholders.Over time,the law of averages-arithmetic averages-allows an insurance company to be profitable.

Question 25

The part of a trip during which cargo is at most risk for theft is

A) the ocean voyage.
B) the inland leg.
C) on the quay of the dock.
D) All of the above
E) None of the above

Question 26

Lloyd's of London acts as a market through which unusual risks are insured.

Question 27

Since there is no problem with inherent vice in air transport,it is not listed as an exclusion in air freight insurance policies.

Question 28

The standards for airfreight packing are much less stringent than for an ocean shipment.

Question 29

Most of the ships that sink each year

A) are older ships.
B) are bulk ships.
C) are ships flying third world countries' flags.
D) All of the above
E) None of the above

Question 30

Marine cargo insurance can be purchased from

A) a barratry.
B) MSC Carla.
C) COGSA.
D) All of the above
E) None of the above

Question 31

Which of the following is an insurance company?

A) Lloyd's
B) Cigna
C) the International Underwriting Association
D) Inchmaree
E) None of the above

Question 32

An exporter in a developing country sells under CIF terms to an importer in a developed country.The exporter provides the minimum required insurance coverage.If there is a loss,the importer would

A) have to file a claim with an insurer in the developing country.
B) be subject to foreign exchange devaluation due to the length of time of claim processing.
C) be required under the CIF terms to pay the invoice despite the delay in receiving the claim.
D) All of the above
E) None of the above

Question 33

According to John Waite,chief surveyor of the Salvage Association,the biggest hazard(s)for container ships is/are

A) foreign exchange exposure.
B) risk retention.
C) leakage.
D) All of the above
E) None of the above

Question 34

A typical container will be handled _____ times in each of the ports of departure and destination.

A) four to six
B) fifteen to twenty
C) fifty to sixty
D) two to three
E) one to two hundred

Question 35

Lloyd's of London originally began in a coffee shop.

Question 36

A ship valued at $1,337,500 is carrying a cargo of iron ore valued at $125,000,and a cargo of coal valued at $100,000.The ship is stranded and the captain jettisons what is later determined to be $12,500 worth of iron ore.The stranded ship is towed to port,receives a bill from the tug company of $56,250 and is determined to have suffered $71,875 worth of damage to the ship.The captain declares a general average.How much liability will the company shipping the coal have?

A) $7,750
B) $9,000
C) $11,250
D) $140,625
E) None of the above

Question 37

The problem of "flags of convenience" in ocean shipping is also a problem in air transit.

Question 38

Premiums in an open ocean cargo policy

A) are based upon the value of shipments made under the policy.
B) are based on the number of pro forma invoices that a company has outstanding.
C) mean the shipper can make one shipment under the insurance policy.
D) All of the above
E) None of the above

Question 39

All marine insurance policies carry a general average clause.

Question 40

A special cargo policy

A) is an insurance policy that covers only one shipment.
B) allows a firm to purchase coverage that specifically fits a particular shipment.
C) results in cumbersome efforts to purchase insurance for each shipment.
D) All of the above
E) None of the above

Question 41

A "Sue and Labor" clause

A) directs the shipper to act in the best interest of the insurance company when a loss occurs.
B) is the same as an Inchmaree clause.
C) specifies that the insurer will reimburse the shipper for goods that have been abandoned after a stranding or a sinking, as long as the costs of recovering the goods and making them marketable is greater than their value.
D) All of the above
E) None of the above

Question 42

Even in good weather,cargo is subject to ship's movement in ____________________ directions at once.

Question 43

"Warehouse-to-Warehouse" coverage is an extension to the traditional

A) All Risks policy.
B) With Average policy.
C) Free of Particular Average policy.
D) All of the above
E) None of the above

Question 44

Airfreight insurance policies

A) are more complicated than ocean marine policies.
B) are written as "All Risks" policies.
C) have none of the traditional exclusions of ocean marine policies.
D) All of the above
E) None of the above

Question 45

Insurance coverage designed to fill the gap between what an importer would like to have covered under its open cargo policy and what is covered under its supplier's CIF or CIP coverage is called

A) a Difference in Conditions coverage.
B) a Constructive Total Loss Coverage.
C) a Sue and Labor clause.
D) an Inchmaree clause.
E) None of the above

Question 46

A major financial problem occurred for Lloyd's of London due to its coverage of

A) oil tankers.
B) Carlos Santana's hands.
C) the Russian embassy in Washington.
D) asbestos.
E) None of the above

Question 47

More companies are selling insurance on an "open-account" basis because

A) countries are providing more export subsidies.
B) the nationalization of Compagnie Francaise d'Assurance pour le Commerce Exterieur has allowed more policies to be issued.
C) the World Trade Organization is now encouraging the practice.
D) All of the above
E) None of the above

Question 48

S.R.& C.C.coverage

A) includes direct physical damage to the insured goods.
B) does not include incidental damage caused by delay to market.
C) does not cover financial losses that accompany a delay in the sale of cargo.
D) All of the above
E) None of the above

Question 49

At Lloyd's,individuals assuming (insuring)risks on their personal fortunes are called

A) agents.
B) barristers.
C) Bespoke Names.
D) speculators.
E) None of the above

Question 50

At Lloyd's,the individuals assuming (insuring)risks are grouped together in

A) associations.
B) underwriting instruments.
C) agencies.
D) Baileys.
E) None of the above

Question 51

Coverage A of the Institute Marine Cargo Clauses is the maximum coverage an exporter or importer would normally need to purchase

A) for most trade lanes of the world.
B) for shipments from one developed country to another.
C) for shipments that stay away from political hot spots of the world.
D) All of the above
E) None of the above

Question 52

Institute Marine Cargo Clauses Coverage C

A) is required by Incoterms CIF and CIP.
B) is appropriate for most goods.
C) is adequate for most containerized goods.
D) All of the above
E) None of the above

Question 53

Condensation damage is covered by All Risks policy and

A) Coverage A of the Institute Marine Cargo Clauses.
B) Coverage B of the Institute Marine Cargo Clauses.
C) Coverage C of the Institute Marine Cargo Clauses.
D) All of the above
E) None of the above

Question 54

Institute for Marine Cargo Clauses Coverage B

A) is a "named-perils" policy.
B) includes coverage for goods washed overboard.
C) includes coverage for water damage, and total losses during loading and unloading.
D) All of the above
E) None of the above

Question 55

The liability of a single P&I club is limited to

A) cargoes of crude oil.
B) $7 million.
C) an international fund.
D) All of the above
E) None of the above

Question 56

At Lloyd's,the individuals assuming (insuring)risks have

A) unlimited liability.
B) limited liability.
C) limited liability only in the United Kingdom.
D) unlimited liability only in the United Kingdom.
E) None of the above

Question 57

Coverage A of the Institute Marine Cargo Clauses requires a special endorsement to cover

A) an unseaworthy vessel.
B) improper packing.
C) strikes and other civil disturbances.
D) All of the above
E) None of the above

Question 58

Goods shipped "under deck"

A) face more perils than goods shipped "on deck."
B) cannot be insured by a United States All Risk policy.
C) are stowed inside the ship.
D) All of the above
E) None of the above

Question 59

Under an American Conditions Free of Particular Average policy,

A) partial losses are covered if they happen on the same voyage as a fire.
B) there is excellent coverage for containerized or break-bulk cargo.
C) partial losses are not covered if they result directly from a fire.
D) it would be enough to cover the minimum insurance requirements of a CIF or CIP shipment.
E) None of the above

Question 60

A letter of credit usually requires

A) an open ocean cargo policy.
B) a special cargo policy.
C) a Certificate of Insurance.
D) All of the above
E) None of the above

Question 61

Hull insurance rates are dependent upon the ____________________ of a ship,the way it is maintained,and the equipment it has on board.

Question 62

An insurance contract is legally binding only if the insured has a(n)____________________ in the subject matter of the insurance.

Question 63

It is impossible to get insurance for ____________________ leakage.

Question 64

Most cargo sent by air has ____________________ value.

Question 65

Protection and ____________________ is a form of insurance for a ship owner against liability to other parties when a ship sinks or is damaged.

Question 66

The chance of a loss that can be accurately calculated,because ample empirical data is available or because a good mathematical model has been developed,is called ____________________ risk.

Question 67

An act of disobedience or willful misconduct by the captain or the crew of a ship that causes damage to the ship or cargo is called ____________________.

Question 68

Some cargoes,such as athletic shoes,cellular telephones,and computer equipment are especially subject to the possibility of theft because they are easy to ____________________.

Question 69

Traditionally,shippers of higher-value cargo will ask that the cargo be carried "____________________ deck."

Question 70

Some products have a natural propensity to be affected a certain way over time.For instance,steel will show surface rust when exposed to air and moisture,agricultural products will foster insects and rodents.This is called inherent ____________________.

Question 71

Cargo of exceptional dimensions such as large pieces of equipment which would not fit in a traditional container or would need special arrangements with the shipping line is called ____________________ cargo.

Question 72

The problem of an insurance policy requiring goods to be shipped "under deck" can be solved by requesting that the insurance company cover the goods based upon the Shipper's Letter of ____________________.

Question 73

To avoid loss of the ship or other cargo,a captain is allowed to ____________________ cargo in order to make the vessel lighter or to protect against cargo that might come loose.