From the Cradle to the Grave: Stock Throughput Coverage

Cargo insurance can be a complicated subject. Making sure you obtain the right coverage for you or your business is critical to ensure you are getting a service that actually adds value to your operation. If any gaps exist, it can leave certain segments of your organization exposed to risks of damage or loss. This is especially significant in the global supply chain, where protecting your goods from a distance can be particularly challenging. Piecing together various local policies to create end-to-end coverage takes time and effort and can be costly. One alternative to this piece-meal method is called a stock throughput policy.

What is a stock throughput policy?
A stock throughput policy (STP) is a type of marine cargo insurance. It covers the flow of the insured goods from the very start to the very end of their supply chain. The term “stock” refers to inventory at various stages of the production and transit cycle, including raw materials, work in progress, and finished goods. The policy is intended to cover stock at all points and locations throughout the supply chain, including the procurement of raw materials, during storage at a manufacturing plant, at consolidation facilities, while transiting on an ocean vessel (or aircraft), during inland transit and transfer, and at distribution centers, to name a few. The policy can even be extended to cover merchandise while at retail locations.

What are the possible benefits of an STP?
In addition to a seamless coverage for goods across the globe, there are additional benefits to investing in a stock throughput policy. Inventory is often insured under a property policy, which typically carries higher premiums and deductibles. Utilizing an STP can effectively remove the inventory from a property policy to take advantage of lower rates and deductibles in a cargo insurance policy. As noted in our recent market update, underwriters tend to shy away from stock-only coverage that doesn’t include any transit and have been more open to considering STP options given today’s hard insurance market. However, this strategy is dependent on market conditions in both the property and marine cargo markets.

Things to consider regarding an STP
As with most insurance or financial products, market conditions will dictate which strategy to implement in terms of coverage or rates. It is crucial to consider the available limits, rates, and deductibles in both the cargo and property markets to ensure that an STP is a viable option for your organization.

Getting the broadest, most seamless coverage to protect your operation is critical. Depending on your company’s structure, along with market conditions in the insurance industry, a stock throughput policy may be a great way to achieve this while saving money overall. ECIB is ready to help you determine if an STP is right for you.

Reach out today for more information about stock throughput policies, market conditions, or any other cargo insurance topics.