Stock Throughput Insurance is designed for companies that import, export or distribute merchandise, such as those in retail and wholesale food and beverage. The policy will cover your company’s goods against any physical damage or loss while in your control anywhere in the global supply chain, or in transit and in storage as company owned inventory. It will also cover goods in a manufacturing process but does not cover for damage to your goods that is caused directly by the manufacturing process.
This insurance policy is designed to provide cover from “end to end”, covering the following stages in the product lifecycle:
* From when the raw material is sourced, throughout the assembly and any work in progress phases.
* Any periods of storage.
* While in transit, either domestic or internationally.
* In some cases, it will provide cover after final delivery if a financial interest is evident.
Stock Throughput Insurance policies feature all-risks protection for marine cargo, inland freight, raw materials, inventory in-process and stock in storage. The cover will protect the entire supply chain with high limits and low deductibles by combining cover that aims to reduce the gaps between policies.
Stock Throughput Risks
The greatest risk to cargo is during loading and unloading to and from vessels. This risk also occurs when goods are moved from storage to transit.
Once manufactured goods arrive at a destination, they either go direct to the end customer or to a storage warehouse before onward distribution.
A stock throughput insurance policy could be the perfect solution if the goods are going into storage before onward distribution.
For an importer involved in storage and distribution this policy can offer:
- Insurance cover for the import, then the transit from the port to storage premises, cover while the goods are stored there, and the delivery to the final customer.
- Certainty that the insurance is correct to cover the risks.
- Cost savings by having only one insurance policy instead of three.
- No gaps in cover, as might occur if separate policies were arranged for the three component parts.
- Potential reductions in administrative costs.
- Coverage at your own or at the third party’s storage premises.
How does it differ from traditional cargo policies?
In the main, there is no standard wording for STP policies. The clauses and scope of coverage are negotiated on an individual basis. Institute Cargo Clauses tend to be used as the basis for most STP contracts.
- Valuation of goods – Definition of the goods and their state is required for both raw materials and finished merchandise.
- Definition of limits – In Marine insurance policies, limits are usually determined based on the means of transportation and the location. Location is an important factor therefore it is important that the insured and the insurer fully understand what is meant by the location. A better solution is usually to agree on a per occurrence basis.
- Inception of coverage and termination of coverage – How long should the policy extend after delivery of the cargo? 60 days is the norm under Institute Cargo Clauses until the interest of the insured party ceases, yet in some market sectors the interests of the insured can be extremely long i.e.: In the food industry certain items can take months, or even years to mature.
- Modes of transportation, facilitation and storage – The logistical supply chain can be complex, which increases the risk of being exposed to losses from disappearances and mishandling. This could require a full risk assessment of the storage facilities involved to determine construction type and location, occupancy, protection, and exposure. STP allows for freedom to choose efficient supply chains and mitigate risk.
Other factors to consider
In recent years there have been a lot of natural disasters and extreme weather conditions that have caused huge losses in the import, export and distribution industry.
Hurricanes Katrina in 2005, Sandy in 2012 and Florence in 2018, earthquakes such as the Chilean quake in 2010, the Thai floods in 2011, and in October 2018 the violent storms in Florida, all these natural disasters have helped to increase reported global losses.
Because to these events, insurers will ask themselves if they are pricing adequately for NatCat exposure, whether they are exposed to NatCat risk, and what the maximum exposure per location could be.
What will the policy not cover?
STP policies will not cover will not cover for errors in processing the insured’s materials into finished goods.
For further details contact Caunce O’Hara on 0161 833 2100More Insights