Compulsory Insurance

Compulsory Insurance refers to insurance that must be taken out for specific trade, transport, or engineering projects in accordance with national laws and regulations or international conventions, and the parties may not exclude it by contract. In foreign trade, it is commonly seen in maritime cargo transport, cross-border engineering contracting, labor cooperation, and other scenarios. For example, under the Maritime Code or Incoterms, carriers must take out liability insurance under certain modes of transport; some countries require imported goods to be insured locally. Use cases include: under CIF or CIP terms, the seller is obliged to arrange insurance (but it is not compulsory), whereas compulsory insurance arises from legal mandate, such as for dangerous goods transport and ship oil pollution liability. Notes: the type of compulsory insurance, insured amount, policyholder, and applicable law must be clearly identified; violation may lead to fines, cargo seizure, or contract invalidity. The difference from voluntary insurance is that compulsory insurance cannot be excluded through negotiation, and premiums and terms are regulated; unlike open cover, which is a voluntary long-term agreement. Foreign trade practitioners should verify the compulsory insurance requirements of the destination country and countries along the route to avoid compliance risks.