1. One of the most complex areas of international logistics is international insurance. 
*a. True
b. False

2. Modern shipping methods mean that container cargo is rarely damaged by water. 
a. True
*b. False

3. It is rare for cargo to fall overboard from ships. 
a. True
*b. False

4. At the time a ship is stranded, its cargo usually suffers heavy damage. 
a. True
*b. False

5. Most piracy occurs near Northwest Asia. 
a. True
*b. False

6. The concept of general average is exclusively used in marine insurance. 
*a. True
b. False

7. Air cargo can be damaged during flight because cargo pilots do not maneuver or fly as gently as passenger pilots do. 
*a. True
b. False

8. If an exporter in a developing country sells to an importer in a developed country on a CIF basis, the responsibility transfers from exporter to importer once the goods are loaded. If there is then a loss, the exporter may suffer a cash flow problem while filing the insurance claim. 
a. True
*b. False

9. The three ways companies can manage risk are through risk retention, risk amalgamation, and through a mixed approach. 
a. True
*b. False

10. Hull insurance does not cover the owners liability toward the cargo owners in the case of a general average. 
a. True
*b. False

11. A P&I club is a mutual form of insurance. 
*a. True
b. False

12. The Institute Marine Cargo Clauses Coverage A, B, and C are governed by British law. 
*a. True
b. False

13. It is possible to find insurance for improper packing. 
a. True
*b. False

14. While it is difficult to obtain, some insurers will write policies covering losses from nuclear war. 
a. True
*b. False

15. British All Risks policies and American All Risks policies are different from each other. 
*a. True
b. False

16. For Institute Marine Cargo Clauses Coverage B, losses due to bad weather are not covered. 
*a. True
b. False

17. A With Average policy does not cover any losses from loading and unloading of the vessel. 
a. True
*b. False

18. It is not possible for a shipper to insure its cargo against war damages. 
a. True
*b. False

19. 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. 
*a. True
b. False

20. Lloyds of London is the oldest insurance company in the history of shipping. 
a. True
*b. False

21. All marine insurance policies carry a general average clause. 
*a. True
b. False

22. Ordinary leakage is of more concern in air transit than in ocean transit. 
a. True
*b. False

23. Since there is no problem with inherent vice in air transport, it is not listed as an exclusion in air freight insurance policies. 
a. True
*b. False

24. The problem of flags of convenience in ocean shipping is also a problem in air transit. 
a. True
*b. False

25. The standards for airfreight packing are much less stringent than for an ocean shipment. 
*a. True
b. False

26. Most air cargo policies are not included in the open cargo policy of a firm. 
a. True
*b. False

27. 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 averagesarithmetic averagesallows an insurance company to be profitable. 
a. True
*b. False

28. Lloyds of London acts as a market through which unusual risks are insured. 
*a. True
b. False

29. Lloyds of London originally began in a coffee shop. 
*a. True
b. False

30. Dangerous cargo can only travel by ocean, not by air. 
*a. True
b. False



1. A typical container will be handled _____ times in each of the ports of departure and destination. 
~ In each of the ports of departure and destination, a container will be handled four to six times. 
@ In each of the ports of departure and destination, a container will be handled four to six times. 
*a. four to six
b. fifteen to twenty
c. fifty to sixty
d. two to three
e. one to two hundred

2. According to John Waite, chief surveyor of the Salvage Association, the biggest hazard(s) for container ships is/are
~ The correct answer is fire. 
@ The correct answer is fire. 
a. foreign exchange exposure. 
b. risk retention. 
c. leakage. 
d. theft. 
*e. fire. 

3. Most of the ships that sink each year 
~ All of these characteristics apply to sinking ships. 
@ All of these characteristics apply to sinking ships. 
a. are older ships. 
b. are bulk ships. 
c. are ships flying third world countries flags. 
*d. are older, bulk ships flying third-world countries' flags. 
e. There is no correlation between the age, type and flag of a ship and its risk of sinking. 

4. Which of the following is a marine insurance company?
~ While Lloyds and the International Underwriting Association are involved in forms of insurance, only Cigna is a marine insurance company. The Inchmaree is a ship name from a court case. Liberty Mutual is a property and casualty insurance company. 
@ While Lloyds and the International Underwriting Association are involved in forms of insurance, only Cigna is a marine insurance company. The Inchmaree is a ship name from a court case. Liberty Mutual is a property and casualty insurance company. 
a. Lloyds
*b. Cigna
c. the International Underwriting Association
d. Inchmaree
e. Liberty Mutual

5. The part of a trip during which cargo is at most risk for theft is
~ On the ocean voyage, the cargo is relatively safe, except for piracy which is not as frequent as theft on inland trips. On the quay, the cargo is readily monitored and is safer than on the inland trip. Loading and Customs clearance present few risks. 
@ On the ocean voyage, the cargo is relatively safe, except for piracy which is not as frequent as theft on inland trips. On the quay, the cargo is readily monitored and is safer than on the inland trip. Loading and Customs clearance present few risks. 
a. the ocean voyage. 
*b. the inland leg. 
c. on the quay of the dock. 
d. while being loaded and unloaded. 
e. while clearing Customs. 

6. 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?    
~ Lost ore value plus tug fees plus ship damage divided by ship value plus ore value plus coal value [($12,500+56,250+71,875)/($1,337,500+125,000+100,000)]=0. 9, the ratio of losses to combined value of cargo and ship. The company shipping the coal has a liability of $100,000 . 09 or $9,000. 
@ Lost ore value plus tug fees plus ship damage divided by ship value plus ore value plus coal value [($12,500+56,250+71,875)/($1,337,500+125,000+100,000)]=0. 9, the ratio of losses to combined value of cargo and ship. The company shipping the coal has a liability of $100,000 . 09 or $9,000. 
a. $7,750
*b. $9,000 
c. $11,250
d. $140,625
e. it is not possible to determine the amount from the information given. 

7. 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 
~ Responsibility for the shipment transfers once the merchandise is loaded onboard the ship, but the exporter provides minimum cover insurance and if there is a loss, the importer has to file a claim with the insurer of the developing country or an insurer not chosen by the importer. CIF terms are silent on payment of invoice (which is determined by the method of payment), and devaluation may or may not happen. There is no such IIC, or obligation to involve the importers insurance company. 
@ Responsibility for the shipment transfers once the merchandise is loaded onboard the ship, but the exporter provides minimum cover insurance and if there is a loss, the importer has to file a claim with the insurer of the developing country or an insurer not chosen by the importer. CIF terms are silent on payment of invoice (which is determined by the method of payment), and devaluation may or may not happen. There is no such IIC, or obligation to involve the importers insurance company. 
*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. have to file a claim with the International Insurance Commission. 
e. be obligated to file a claim with his own insurance company, that would then file with the exporters insurance company. 

8. Marine cargo insurance can be purchased from
~ Marine cargo insurance can be purchased through an insurance agent or a freight forwarder. 
@ Marine cargo insurance can be purchased through an insurance agent or a freight forwarder. 
a. a barratry. 
b. the MSC Carla. 
c. COGSA. 
d. an insurance surveyor. 
*e. a freight forwarder. 

9. Premiums in an open ocean cargo policy
~ Premiums are not linked in any way to the number of pro forma invoices issued by a company; the shipper can make more than one shipment under the policy. Premiums are based upon the value of the shipments under an open ocean cargo policy, and not on their quality, or the characteristics of the importer. 
@ Premiums are not linked in any way to the number of pro forma invoices issued by a company; the shipper can make more than one shipment under the policy. Premiums are based upon the value of the shipments under an open ocean cargo policy, and not on their quality, or the characteristics of the importer. 
*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. are determined by the quality of the goods exported. 
e. are adjusted in function of the risk presented by the importer. 

10. A special cargo policy
~ A special cargo policy is contracted for only one shipment at a time. 
@ A special cargo policy is contracted for only one shipment at a time. 
*a. is an insurance policy that covers only a single shipment. 
b. allows a firm to purchase coverage that covers all its shipment. 
c. forces a company to purchase insurance for each shipment. 
d. covers all risks associated with a series of shipments. 
e. means that the policy covers a shipment of dangerous goods. 

11. A letter of credit usually requires
~ A letter of credit usually requires a Certificate of Insurance. An open ocean cargo policy and a special cargo policy are not directly relevant in this case. 
@ A letter of credit usually requires a Certificate of Insurance. An open ocean cargo policy and a special cargo policy are not directly relevant in this case. 
a. an open ocean cargo policy. 
b. a special cargo policy. 
*c. a Certificate of Insurance. 
d. proof of hull insurance. 
e. an Incoterms Rule that includes insurance  

12. The liability of a single P&I club is limited to 
~ P&I club liability is not limited to crude oil, but it limited to U. S. $7 million. Although the 13 P&I clubs form an alliance and mutually insure each other, they do not have unlimited liability. 
@ P&I club liability is not limited to crude oil, but it limited to U. S. $7 million. Although the 13 P&I clubs form an alliance and mutually insure each other, they do not have unlimited liability. 
a. cargoes of crude oil. 
*b. $7 million. 
c. an international fund. 
d. the wealth of its member companies
e. nothing. A P&I Club has unlimited liability

13. Coverage A of the Institute Marine Cargo Clauses requires a special endorsement to cover
~ Unseaworthy vessels and improper packing are never insurable. Coverage against strikes and other civil disturbances can be in this case with a special endorsement. 
@ Unseaworthy vessels and improper packing are never insurable. Coverage against strikes and other civil disturbances can be in this case with a special endorsement. 
a. an unseaworthy vessel. 
b. improper packing. 
*c. strikes and other civil disturbances. 
d. nuclear war. 
e. ordinary leakage. 

14. Coverage A of the Institute Marine Cargo Clauses is the maximum coverage an exporter or importer would normally need to purchase
~ All of these options apply in a Coverage A. 
@ All of these options apply in a Coverage A. 
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 these options apply to Coverage A. 
e. for most manufactured goods. 

15. Goods shipped under deck
~ Goods shipped under deck are stowed inside the ship, and face fewer perils than goods shipped on deck and can be insured by U. S. All Risk policies and Institute Cargo Clauses policies. 
@ Goods shipped under deck are stowed inside the ship, and face fewer perils than goods shipped on deck and can be insured by U. S. All Risk policies and Institute Cargo Clauses policies. 
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. cannot be covered by Institute Cargo Clauses policies. 
e. cannot obtain a Certificate of Insurance. 

16. Institute for Marine Cargo Clauses Coverage B
~ Institute for Marine Cargo Clauses Coverage B is a named-perils policy and includes coverage for the perils named in the policy. 
@ Institute for Marine Cargo Clauses Coverage B is a named-perils policy and includes coverage for the perils named in the policy. 
*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. covers goods that are damaged by improper packing. 
e. covers goods in the case of inherent vice. 

17. Institute Marine Cargo Clauses Coverage C
~ Coverage C is the minimum coverage required by Incoterms CIF and CIP; it is inappropriate for most goods; it is generally insufficient for most containerized goods. 
@ Coverage C is the minimum coverage required by Incoterms CIF and CIP; it is inappropriate for most goods; it is generally insufficient for most containerized goods. 
*a. is required by Incoterms CIF and CIP. 
b. is appropriate for most goods. 
c. is adequate for most containerized goods. 
d. is the best type of policy that can be purchased. 
e. is recommended by the Institute Cargo Clauses writers

18. Under an American Conditions free-of-particular-average policy,
~ Partial losses are covered if they happen on the same voyage as a fire applies only to an English Conditions Free of Particular Average policy. In an American Conditions Free of Particular Average policy, there is poor coverage for containerized or break-bulk cargo, partial losses are covered if they result directly from a fire, and it would not be enough to cover the minimum insurance requirements of a CIF or CIP shipment. 
@ Partial losses are covered if they happen on the same voyage as a fire applies only to an English Conditions Free of Particular Average policy. In an American Conditions Free of Particular Average policy, there is poor coverage for containerized or break-bulk cargo, partial losses are covered if they result directly from a fire, and it would not be enough to cover the minimum insurance requirements of a CIF or CIP shipment. 
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 options apply to an American Conditions free-of-particular-average policy. 

19. S. R. & C. C. coverage
~ S. R. & C. C. coverage only covers direct physical damage to the goods. It does not include incidental damage caused by delay in the sale of the cargo, nor financial losses dues to delays. 
@ S. R. & C. C. coverage only covers direct physical damage to the goods. It does not include incidental damage caused by delay in the sale of the cargo, nor financial losses dues to delays. 
*a. includes only direct physical damage to the insured goods. 
b. includes incidental damage caused by delay to market. 
c. covers financial losses that accompany a delay in the sale of cargo. 
d. includes direct physical damage to the goods and financial losses due to delays. 
e. includes direct physical damage to the goods and any incidental loss due to delays. 

20. A Sue and Labor clause
~ A Sue and Labor clause directs the insured to protect the cargo when a loss occurs, from further damage, in order to keep the loss to a minimum. An Inchmaree clause has to do with damage caused by a burst boiler. A Constructive Total Loss Coverage clause 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. 
@ A Sue and Labor clause directs the insured to protect the cargo when a loss occurs, from further damage, in order to keep the loss to a minimum. An Inchmaree clause has to do with damage caused by a burst boiler. A Constructive Total Loss Coverage clause 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. 
*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. covers losses due to boiler/engine explosions. 
e. covers losses stemming from a grounding of the ship. 

21. 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 suppliers CIF or CIP coverage is called
~ A Difference in Conditions coverage is used to fully cover a shipment when only a CIF or CIP is required. A Constructive Total Loss Coverage clause essentially specifies that the insurer will reimburse the shipper for goods that have been abandoned after a stranding or a sinking; a Sue and Labor clause directs the insured to protect the cargo from further damage when a loss occurs; and an Inchmaree clause covers damage from burst boilers and errors in navigation and seamanship. 
@ A Difference in Conditions coverage is used to fully cover a shipment when only a CIF or CIP is required. A Constructive Total Loss Coverage clause essentially specifies that the insurer will reimburse the shipper for goods that have been abandoned after a stranding or a sinking; a Sue and Labor clause directs the insured to protect the cargo from further damage when a loss occurs; and an Inchmaree clause covers damage from burst boilers and errors in navigation and seamanship. 
*a. a Difference in Conditions coverage. 
b. a Constructive Total Loss Coverage. 
c. a Sue and Labor clause. 
d. an Inchmaree clause. 
e. a General Average clause. 

22. Airfreight insurance policies
~ Airfreight insurance policies are less complicated than ocean marine cargo policies and have the same traditional exclusions. They are written as All Risks policies with the traditional exclusions found in ocean marine policies. 
@ Airfreight insurance policies are less complicated than ocean marine cargo policies and have the same traditional exclusions. They are written as All Risks policies with the traditional exclusions found in ocean marine 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. are written as "Free of Particular Average" policies. 
e. are written as "With Average" policies. 

23. At Lloyds, individuals assuming (insuring) risks on their personal fortunes are called
~ Bespoke Names are Lloyds of London vernacular for individuals who have unlimited liability for insurance risks on their personal assets. 
@ Bespoke Names are Lloyds of London vernacular for individuals who have unlimited liability for insurance risks on their personal assets. 
a. agents. 
b. barristers. 
*c. Bespoke Names. 
d. speculators. 
e. esquires. 

24. At Lloyds, the individuals assuming (insuring) risks are grouped together in
~ At Lloyds, the individuals (Corporate Members and Bespoke Names) assuming (insuring) risks are grouped together in syndicates. 
@ At Lloyds, the individuals (Corporate Members and Bespoke Names) assuming (insuring) risks are grouped together in syndicates. 
a. associations. 
b. underwriting partnerships. 
c. agencies. 
d. bailiffs. 
*e. syndicates. 

25. At Lloyds, the individuals assuming (insuring) risks have
~ Bespoke Names assuming risks have unlimited liability for those risks on their personal assets. 
@ Bespoke Names assuming risks have unlimited liability for those risks on their personal assets. 
*a. unlimited liability. 
b. limited liability. 
c. limited liability only in the United Kingdom. 
d. unlimited liability only in the United Kingdom. 
e. unlimited liability in the European Union. 

26. A major financial problem occurred for Lloyds of London due to its coverage of
~ Lloyds of Londons syndicates covered the risk of asbestos product liability, which was so extensive, many Bespoke Names were brought to personal bankruptcy. 
@ Lloyds of Londons syndicates covered the risk of asbestos product liability, which was so extensive, many Bespoke Names were brought to personal bankruptcy. 
a. oil tankers. 
b. Carlos Santanas hands. 
c. the Russian embassy in Washington. 
*d. asbestos. 
e. Lionel Messi's legs. 

27. More companies are selling their goods on an open-account basis because
~ Competitive pressures are pushing firms to sell on an open-account basis, as customers try to acquire the best possible payment alternatives. Countries are providing fewer export subsidies, while the nationalization of Compagnie Francaise dAssurance pour le Commerce Exterieur is not relevant, and the World Trade Organization has no interest in methods of payment. 
@ Competitive pressures are pushing firms to sell on an open-account basis, as customers try to acquire the best possible payment alternatives. Countries are providing fewer export subsidies, while the nationalization of Compagnie Francaise dAssurance pour le Commerce Exterieur is not relevant, and the World Trade Organization has no interest in methods of payment. 
a. countries are providing more export subsidies. 
b. the nationalization of Compagnie Francaise dAssurance pour le Commerce Exterieur has allowed more policies to be issued. 
c. the World Trade Organization is now encouraging the practice. 
d.  countries have implemented quotas for exporters. 
*e. it is possible to purchase credit insurance to cover the risk of non-payment. 

28. Condensation damage is covered by all-risks policies and
~ Coverage A, along with All Risks, are the only coverages that apply to condensation damage. 
@ Coverage A, along with All Risks, are the only coverages that apply to condensation damage. 
*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. with-average policies
e. free-of-particular average policites

29.  Warehouse-to-Warehouse coverage is an extension to the traditional
~ The Warehouse-to-Warehouse coverage is an extension to the traditional All Risks, With Average, and Free of Particular Average Policies. 
@ The Warehouse-to-Warehouse coverage is an extension to the traditional All Risks, With Average, and Free of Particular Average Policies. 
a. all-risks policy. 
b. with-average policy. 
c. free-of-particular-average policy. 
*d. All policies can be be extended to include this coverage. 
e. None of the policies but Coverage A of the Institute Marine Cargo Clauses can be extended to include this coverage. 


Type: F
1. Even in good weather, cargo is subject to ships movement in ____________________ directions at once. 
a. six

Type: F
2. Traditionally, shippers of higher-value cargo will ask that the cargo be carried ____________________ deck. 
a. under

Type: F
3. 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. 
a. jettison

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

Type: F
5. Most cargo sent by air has ____________________ value. 
a. high
b. higher

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

Type: F
7. Hull insurance rates are dependent upon the ____________________ of a ship, the way it is maintained, and the equipment it has on board. 
a. sea-worthiness
b. seaworthiness

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

Type: F
9. 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 ____________________. 
a. vice

Type: F
10. It is impossible to get insurance for ____________________ leakage. 
a. ordinary

Type: F
11. 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. 
a. project

Type: F
12. 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 ____________________. 
a. barratry

Type: F
13. 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. 
a. objective

Type: F
14. 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 Shippers Letter of ____________________. 
a. Instruction


