Insurance Documents


An insurance document is one of the most important documents to be presented under a documentary credit. A documentary credit should indicate if an insurance document is to be presented by the beneficiary or whether the applicant is responsible for arranging insurance cover.

Apart from the needs of an applicant, it is important for a bank that issues a documentary credit, or one that agrees to finance thereunder, to know that the goods are or will be insured in the event of loss or damage. This is especially so should such bank become the owner of those goods, owing to a payment default by the applicant or issuing bank.

Of the types of insurance document that can be presented, i.e., an insurance policy, insurance certificate or a declaration under open cover, the insurance certificate is by far the most common. An insurance certificate serves as a snapshot of the insurance policy from which it derives.

Issuing banks will often require an applicant to provide proof, on an annual basis, that insurance is in place and adequate to cover the value of documentary credits that are issued for that applicant. This is often a pre-condition of granting a documentary credit facility.

In the event of loss or damage to the goods, an insurance document allows the insured to submit a claim upon the insurance company, underwriter or their agent or proxy, which may offset any payment made in respect of a complying presentation under a documentary credit or provide the funding for the replacement of all or part of the goods. 

Such documents are also the cause of many disputes between banks and between a bank and a beneficiary. Issues such as determining whether all the required or issued originals have been presented; has the document been signed correctly; are certain exclusion clauses permitted; and do the stated risks reflect those required by the documentary credit, are regular areas of concern.

A requirement in a documentary credit for an insurance document to be presented indicates that such document is to be issued and signed by: an insurance company, or, an underwriter, or, their respective agent or proxy.

Issuance and signing in the manner of, for example, "LC Insurance Ltd" or "LC Underwriters Ltd" would provide an indication of issuance and signing by an insurance company or underwriter. In the event that the issuer of a document is identified as "insurer", there is no need for any further indication that the issuer is an insurance company or underwriter. 





More information can be found in the CDCS, ISBP and Document Preparation modules at

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