Stock Throughput Policies (STP) are designed for companies that import, distribute, or export merchandise. The policy provides cover for all moveable goods (inventory) that are the subject of the insured’s trade, including raw materials, semi-finished, and finished products. The goods are covered at all times whether in transit, undergoing process (although damage caused by the manufacturing process is excluded), or in storage at owned or third party premises, including options to extend coverage to retail locations (Retail Stock Throughput).
Purchasing a stock throughput policy rather than a separate transit and storage or property policy can provide a more seamless coverage of goods as well as more control of inventory risks throughout the entire supply chain, from the supplier or point of origin through to the goods’ final destination.
The transfer of materials and goods through supply chains has never been more fragile. Global outsourcing, economic impairments, government regulations, and bills-of-material with countless suppliers compound the volatility of supply chains. Thus, companies should make every effort to command control of the goods in transit to and from their operations. The flexibility provided to the insureds via STP policies can assist them in managing their insurance premium expense by allowing insureds to choose between different distribution channels. This flexibility is the key driver for creating a strong, cost effective supply chain model. Options for distribution channels include:
By using this flexibility of choice the insured can control the volume of shipments and loss experience. This can lead to controlling more of the supply chain and increasing purchasing volume, potentially resulting in a better rate on the premium.
An STP is a marine policy that insures a company’s inventory and the flow of goods from the source of production to its final destination, whether at a place of storage or a retail store. An STP policy has three components:
STP policies integrate transportation, inventory storage, material handling, and packaging as they are designed to cover the repositioning of:
The STP focus is on addressing goods throughout the global infrastructure from beginning to end. Coverage terms typically include all goods in transit globally as well as all stock/inventory (works in progress as well as finished goods). Goods are covered at the insured’s location(s) as well as while at subcontractors, consolidators, and warehouse locations. The policies typically include coverage at manufacturing locations, often subject to a process clause, which provides the insured with coverage for loss or damage occurring during the manufacturing process. However, it does not provide coverage for any errors in processing the insured’s raw materials into finished products.
While there are clear coverage benefits to an STP policy, a cost benefit can often also be achieved, particularly when the marine market is soft and the property market is hardening. An STP policy allows for the removal of the inventory from a property policy which may reduce an overall required property limit, increasing property market options, particularly where there are exposures in CAT regions, or higher risk geographies.
In addition to broad coverage, high limits, low deductibles and a competitive cost, STP’s also deliver efficiencies in program administration and potentially reduce both overhead and operating costs.
With the wide ranging capabilities an opportunities to tailor a program to fit a variety of needs, we encourage you to contact us to discuss the opportunities that this type of insurance program can yield.