All risks vs named perils insurance: the difference explained

The two bases of cover

Almost every non-life insurance policy is built on one of two foundations. A named perils policy starts from nothing and adds: it lists the events — fire, explosion, overturning of the vehicle, entry of sea water, and so on — and responds only when one of those events causes the loss. An all risks policy starts from everything and subtracts: it covers loss or damage from any fortuitous external cause, and then carves out what the insurer will not pay for through exclusions.

Neither basis is a description of quality. They are different ways of allocating uncertainty. Named perils allocates the risk of the unlisted, unforeseen cause to the insured. All risks allocates it to the insurer — unless the insurer has excluded it in terms.

Why the burden of proof is the real difference

The distinction matters most when nobody is entirely sure what happened — which, in cargo claims especially, is often. A container arrives and the goods inside are damaged. Nobody saw the event; there is only the condition of the cargo at outturn.

Under an all risks policy, the insured’s task is to show that a fortuitous loss occurred during the period of cover — that the goods went in sound and came out damaged by some accidental cause. The insured does not have to prove precisely which peril operated. If the insurer wants to decline, it must positively bring the loss within an exclusion, such as inherent vice or insufficient packing.

Under a named perils policy, the same claim starts from the other end: the insured must show, on the balance of probabilities, that one of the listed perils caused the damage. Where the cause is genuinely unknown, that burden can be difficult to discharge — and the claim can fail not because the loss was excluded, but because it could not be positively attributed to a listed peril.

Marine cargo: where the split is codified

Marine cargo is the clearest example because the market standardised the two bases decades ago in the Institute Cargo Clauses, used worldwide under English law and practice:

• ICC (A) — the all risks basis: loss or damage from any cause, subject to the exclusions set out in the clauses.
• ICC (B) — named perils: a defined list including events such as fire, vessel grounding or sinking, overturning of land conveyance, and entry of sea, lake or river water.
• ICC (C) — the narrowest set: a shorter list confined broadly to major casualties of the voyage.

All three sets sit within the same framework: general average and salvage contributions are dealt with, and war and strikes are excluded from the standard clauses and bought back, where needed, under separate Institute war and strikes clauses. Concepts such as general average and particular average apply across the framework, against the backdrop of the Marine Insurance Act 1906. Most commercial cargo is insured on the (A) clauses; (B) and (C) tend to appear for robust bulk commodities, used goods, or where a sales contract specifies a minimum basis. Our marine cargo and engineering page covers how the cover is arranged in practice, and marine trades insurance deals with the businesses around the cargo.

Commercial property: the same split, less visible

Property wordings rarely advertise which basis they use, but the split is there. Many modern commercial combined and property owners wordings are written on an “all risks” or “accidental damage” basis. Others — particularly older or budget wordings — insure a specified list of perils: fire, lightning, explosion, aircraft, then optional additions such as storm, flood, escape of water, impact and malicious damage. The difference surfaces in exactly the same way as in cargo: the unexplained loss, the cause that was never on the list, the claim that turns on who has to prove what.

Why “all risks” never means everything

No all risks policy covers every conceivable loss. The standard architecture excludes, among other things: loss caused by the insured’s own wilful misconduct; ordinary wear and tear and gradual deterioration; inherent vice — the tendency of goods to deteriorate by their own nature; loss caused by delay; and, in cargo, insufficiency of packing and the financial failure of carriers. War and strikes sit outside the standard cover. “All risks” is therefore best read as “all fortuitous external causes, minus the exclusions” — and the exclusions are where a careful reader spends their time.

How to choose between them

Four questions do most of the work. First, how vulnerable are the goods or property — fragile, theft-attractive or moisture-sensitive cargo argues strongly for all risks. Second, how likely is an unexplained loss — long multimodal transits and containerised goods make unattributable damage more common, which is precisely where the all risks burden of proof earns its premium. Third, what does the contract require — sales contracts on CIF or CIP terms, banks and buyers often stipulate a minimum basis. Fourth, what does the price difference actually buy — sometimes the saving on a named perils basis is trivial against the exposure it leaves behind. A broker’s job is to put those four answers side by side and let you make the call with the trade-offs visible.

Frequently asked questions

Does “all risks” insurance really cover everything?

No. “All risks” means the policy covers fortuitous loss or damage from any cause that is not excluded. Every all risks wording carries exclusions — typically inherent vice, ordinary wear and tear, delay, wilful misconduct and similar — so the exclusions, not the insuring clause, define the real edges of the cover.

What is the burden-of-proof difference between all risks and named perils?

Under an all risks policy the insured needs to show a fortuitous loss occurred during the period of cover; it is then for the insurer to bring the loss within an exclusion. Under a named perils policy the insured must show that one of the specifically listed perils caused the loss. That difference decides many marginal claims.

What is the difference between Institute Cargo Clauses A, B and C?

ICC (A) is written on an all risks basis, subject to exclusions. ICC (B) and (C) are named perils clauses: they list the events they respond to, with (B) covering a wider list than (C). The right set depends on the goods, the route, the mode of transport and what the sales contract requires.

Which basis applies to commercial property insurance?

Both exist. Many modern commercial property wordings are written on an “all risks” or “accidental damage” basis, while others — particularly budget or specified perils wordings — cover only listed perils such as fire, lightning, explosion, storm and flood. The policy wording, not the product name, tells you which you have.

Is all risks cover always the better choice?

It is usually the wider cover and it shifts the evidential burden in the insured's favour, but it costs more and is not always available for every cargo or trade. For robust goods on low-risk routes, or where a sales contract only requires named perils cover, a named perils basis can be a rational commercial choice.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.