14.1 Introduction

Open covers, and floating policies, are well-known insurance instruments in international trade and have been used for a long time. Open covers are commercially convenient, expedient, even if somewhat exotic, creations of the commercial mind. They are convenient because they enable both assured and insurer to make a contractual arrangement, specifying in advance the applicable terms for the insurance of multiple subject matters, whether ship, cargo, freight or liability risks. In this way, a commodity exporter, trader or importer whose business it is to ship numerous cargoes at numerous places at any time during a calendar year, can avoid negotiating a new and separate insurance contract for each cargo shipped, and make all the necessary arrangements at one time for the year under a facility whose terms (as to premium, limits, scope of cover, insuring conditions, special warranties and the like) are agreed when the open cover is placed. They are expedient because such instruments are variously adaptable, as reflected in the different types of cover available, ranging from fully obligatory floating policies to fully discretionary open-cover facilities.