The insurance document must be endorsed by the party to whose order claims are payable.
An insurance document can state that the claims are payable to order, to the order of the Assured (L/C Beneficiary) or to the order of L/C issuing bank. If the insurance document does not state to whose order claims are payable or that the claims are payable to order, the insurance document must be endorsed by the Assured, if named.
If the letter of credit is silent as to the insured party and the insurance document does not name the Assured, it can be endorsed by the L/C Beneficiary as the lawful holder.
ISBP paragraph K21(a) stipulates that:

“When a credit is silent as to the insured party, an insurance document is not to evidence that claims are payable to the order of, or in favour of, the beneficiary or any entity other than the issuing bank or applicant, unless it is endorsed by the beneficiary or that entity in blank or in favour of the issuing bank or applicant.”

In the English law case Kredietbank Antwerp v. Midland Bank Plc1, the letter of credit required the presentation of an "original insurance policy or certificate in negotiable form blank endorsed for gross invoice value plus 10 percent ...". Amongst the documents tendered for payment to the negotiating bank by the L/C Beneficiary were the original and a duplicate of an insurance policy that stated the Assured "To Order". Both the original and duplicate of the insurance policy were endorsed in blank by the L/C Beneficiary.
The negotiating bank, Kredietbank Antwerp paid the proceeds to an assignee of the L/C Beneficiary and then sent the documents to the issuing bank, Midland Bank. The issuing bank rejected the documents on the grounds that the insurance policy did not state the name of the Assured and therefore were not in negotiable form. The issuing bank contended that:

"unless the L/C beneficiary is named in the insurance policy, there is no assurance that the endorsement is valid and that the bank will be able to assert the rights of the holder against the insurer. [...] As with bills of lading, the person to whom the policy is issued must be named in it, so that subsequent holders will know that the blank endorsement was made by the person entitled to do so."

The negotiating bank brought a claim for wrongful dishonor against the issuing bank. The claim was upheld by the English Commercial Court and English Court of Appeal.
The English Court of Appeal held that:

"the objection fails because it seeks to introduce a requirement that was not stated in the credit; namely, that the assured should be named in the policy. Being made out “To Order”, it was in negotiable form and it was blank endorsed. There is no authority in law and no support in practice for any suggestion that its failure to name the assured rendered the policy invalid or unenforceable against the insurers. If [the applicant of L/C] required a safeguard against the risk [that the endorsement will not be made by the Assured and thereby the applicant will not be able to assert the rights of the holder against the cargo insurer], then it could and should have included a suitable provision in its instructions to Midland [issuing bank]2."
The letters of credit that are silent as to the insured party are required to be issued in back-to-back sales where commodity traders procure the goods from suppliers for on-sale to the final buyers and want to conceal the identity of suppliers to the final buyers. Such letters of credit are issued either as transferable letters of credit or as back-to-back letters of credit and provide that the certificates of origin, quality and quantity and insurance documents should be issued "For The Account Of Whom It May Concern" or "To Whom It May Concern" without mentioning the name of suppliers.
The insurance documents are made out "To Order" or "For The Account Of Whom It May Concern" on the basis that the Assured must have an insurable interest in the subject-matter insured at the time of the loss even though he may not be interested when the insurance is effected.
In the US law case Atlas Assurance Company Ltd. v. Harper Robinson Shipping Co.3, the insurance certificates tendered for payment under letter of credit had the following provisions:

 "Assured: Sterling International (CIF Seller)
  For account of whom it may concern
  Loss, if any, payable to the Assured or order."

The insurance certificates were endorsed in blank by Sterling International, L/C Beneficiary.
Based on a previous US Supreme Court decision, the US Court of Appeals for the 9th Circuit held that the meaning of the words "For the account of whom it may concern" is that:

"it is not necessary that at the time of effecting the insurance the person taking it out should intend it for the benefit of some then known and particular individual, but that it would cover the case of one having an insurable interest at the time of the happening of the loss and who was intended to be protected at the time the party took out the insurance."

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Coal Trade Review Edition No. 2.


1. [1999] 1 Lloyd`s Rep. 219
2. To avoid this kind of disputes, the CIF buyers could ask the issuing banks to include in the letter of credit conditions the requirement that the insurance policy or certificate be "made out to Beneficiary`s order and blank endorsed".
3. 508 F.2d 1381 (9th Circuit 1975)