Primary Insurance

Primary Insurance is a fundamental concept in cargo transportation insurance in international trade. It refers to insurance where the policyholder directly enters into an insurance contract with the insurer (insurance company), and the insurer bears direct liability for losses to the insured subject matter caused by insured perils. It is the opposite of reinsurance and occupies the first layer of the insurance chain. In foreign trade, primary insurance is usually arranged by the exporter or importer according to trade terms (such as CIF, CIP), or by the buyer. When using primary insurance, note: 1. The insured amount, coverage, and claim settlement location must comply with contract requirements; 2. The primary insurance policy is the main document for claims and must be kept properly; 3. If cargo loss occurs, the insured claims directly from the primary insurer, not the reinsurer. The difference from reinsurance is: primary insurance is a direct contractual relationship between the insurer and the policyholder, while reinsurance is a risk-sharing arrangement between the primary insurer and the reinsurer. In addition, primary insurance differs from co-insurance: co-insurance involves multiple insurers jointly bearing the same risk, while primary insurance involves only one insurer (or one lead insurer). Foreign trade practitioners should clearly understand the scope of liability under primary insurance, avoid confusion with open cover and individual policies, and ensure correct insurance placement under trade terms.