Aviation cargo insurance

For more on this part of the insurance industry:

1. visit our aircraft insurance page for a look at all products in this sector
2. or focus in on all of the aviation cargo insurance products available on IB Markets!

What is aviation cargo insurance? 

Aviation cargo insurance protects goods transported by air against risks like damage, loss, or theft during transit. This coverage ensures businesses avoid financial losses from unforeseen events affecting their shipments. Why this insurance matters: 

• the Australian Transport Safety Bureau (ATSB) investigated a cargo shift aboard a Boeing 737 in 2023, causing balance issues and delivery delays 
• turbulence-related cargo damage cases have driven businesses to prioritise comprehensive coverage 

These examples underline the value of aviation cargo insurance in Australia for protecting business assets in unpredictable situations. 

Aviation cargo insurance: industry trends and emerging risks 

Supply chain disruptions, worsened by the COVID-19 pandemic and natural disasters, continue to challenge the aviation cargo insurance sector. Rising costs for repairs, transport, and sourcing parts add financial pressures.  

Alongside these risks, emerging trends and challenges are reshaping the industry: 

• handling complex claims: major airline losses, leasing disputes, and cargo claims have pushed some firms to develop new aviation insurance practices 

• sustainable aviation fuels: adoption of SAF and emission reduction efforts are reshaping insurer strategies for addressing climate-related threats 

• inflation and supply chain disruptions: rising repair and transport costs pose challenges for the Australian aviation insurance market 

Cyber threats like breaches and data theft heighten demand for cyber insurance. Brokers should help clients secure policies covering both traditional and emerging aviation risks. 

Aviation cargo insurance FAQs 

What does air cargo insurance cover? 

Also known as aviation cargo insurance, this insurance protects goods during air transit against various risks. Standard policies typically cover: 

• accidental damage during transit, including loading and unloading 
• theft or non-delivery 
• fire and explosion 
• natural disasters 
• collisions and overturning 

In Australia, policies can be personalised to include additional protections, such as coverage for temperature-sensitive goods or high-value items. 

How much is $100,000 in cargo insurance? 

Cargo insurance premiums typically range from 0.1% to 2% of the shipment's value. For a $100,000 shipment, this equates to around $100 to $2,000. Factors influencing the premium include: 

• type and value of cargo 
• packing and shipping methods 
• mode of transport 
• route length and destinations 
• desired coverage level and deductibles 

Given these variables, consulting with an insurance broker is vital to obtain an accurate quote tailored to specific shipping requirements. 

Who typically needs aviation cargo insurance coverage? 

Aviation cargo insurance is essential for industries and stakeholders involved in air freight, including: 

• manufacturers and exporters: shipping high-value or fragile goods 

• importers: transporting perishable or sensitive items 

• logistics providers: managing domestic or international shipments 

• e-commerce businesses and retailers: distributing goods quickly 

• pharmaceutical companies: shipping medical supplies 

• art dealers and auction houses: handling valuable pieces 

• freight forwarders, airlines, and 3PL providers: managing shipments 

• warehouse operators: storing goods during transit 

This coverage ensures economic protection for all parties involved in air cargo operations. 

Is aviation cargo insurance mandatory for international shipping? 

Carrier liability is governed by the Carriage of Goods by Sea Act 1991 (Cth) (COGSA 1991) and international conventions like the Warsaw and Montreal Conventions. This liability is often limited and may not cover the full value of goods. 

What is the difference between cargo insurance and freight insurance? 

The key difference lies in their purpose. The distinction between the two is shown below: 

• cargo insurance: provides compensation to cargo owners for damaged, lost, or stolen goods based on the shipment's declared value 

• freight insurance: covers liabilities for carriers or freight forwarders when errors or negligence lead to issues during transit 

Businesses involved in shipping should evaluate their preferences carefully to determine the right type of coverage to minimise financial hazards. 

Should I get cargo insurance? 

Whether one needs cargo insurance depends on the value and importance of the shipment. It is especially critical for high-value, fragile, or perishable goods transported over long distances. 

Benefits of aviation cargo insurance for businesses 

• financial protection: safeguards against monetary losses due to unexpected events during air transit 

• risk mitigation: reduces the impact of accidents, natural disasters, or theft on business operations 

• peace of mind: allows businesses to operate confidently, knowing their goods are insured against potential hazards 

In Australia, while not legally mandatory, aviation cargo insurance is highly recommended to guarantee inclusive coverage beyond carrier liability.