Indemnity letter

An indemnity letter, or letter of indemnity (LOI), is a written undertaking to hold a party harmless for acting against the strict documentary position, most often given to a carrier to deliver cargo without production of the original bill of lading or to issue a clean bill against claused goods. The LOI is a contractual promise, not security like a bank guarantee, so its value rests on the giver’s solvency. Delivery without the bill of lading breaks the contract of carriage and voids P&I cover, which is exactly why the carrier demands the LOI, often countersigned by a first-class bank.