> ## Documentation Index
> Fetch the complete documentation index at: https://docs.cargotrading.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# Insurance and Loss Absorption for Vault Shares

> What insurance covers the goods behind every Cargo vault share, what it does not cover, and the other layers that absorb losses before a holder does.

The goods behind every share are insured as physical stock, in every vault. Smart-contract risk is not insured.

## What Is Covered

| Cover | Scope | Paid By |
| :- | :- | :- |
| All-risks stock insurance | Physical loss of or damage to receipted lots in storage | Originator, at cost, until the goods are sold |
| Transit cover | Goods moving from storage to the buyer | Within delivery costs, deducted in NAV |

The insurer and policy terms for each vault are shared with investors on signing and in the data room.

## What Is Not Covered

* Smart-contract exploits, key loss or chain failures.
* Falls in the price of the underlying asset.
* Losses from legal or regulatory change.

## Loss Absorption, in Order

```mermaid theme={null}
flowchart TB
    subgraph R1["Weight or grade shortfall"]
        direction LR
        S["Shortfall<br/>on a lot"] --> U["1 · Originator tops up<br/>within 5 business days"] -- "if not" --> V["2 · Originator's 10%<br/>subordinated shares absorb it"]
    end
    subgraph R2["Physical loss, or anything still short"]
        direction LR
        I["3 · All-risks<br/>insurance claim"] -- "if still short" --> E["4 · Pledge enforced,<br/>the SPV sells the goods"] --> H(["Senior holders"])
    end
    R1 --> R2
    classDef key fill:#0E4A66,stroke:#5BB4DB,stroke-width:2px,color:#ffffff
    classDef accent fill:#F47A20,stroke:#F47A20,color:#ffffff
    class U,V,I,E accent
    class H key
    style R1 fill:transparent,stroke:#8A96A0,stroke-dasharray:4 4
    style R2 fill:transparent,stroke:#8A96A0,stroke-dasharray:4 4
```

**1. Originator Top-Up**

A weight or grade shortfall is topped up by the originator within five business days.

**2. Subordinated Shares**

If not, it is met from the originator's 10% subordinated shares (first loss).

**3. Insurance**

Physical loss or damage is claimed under the all-risks policy.

**4. Enforcement**

The security agent enforces the pledge, and the SPV sells the goods.

## How to Verify Cover

* Ask for the policy summary and certificate in the data room.
* Check the lot's receipt in the lot registry: every receipted lot must be insured.
* Policies are time-bound; check the cover period is current.

> [!WARNING]
>
> Insurance does not cover every loss. Never assume full protection.


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