While there are clear coverage benefits to an STP, a cost benefit can often also be achieved, particularly when there is significant capacity and low premiums in the marine insurance market and reduced capacity and rising premium rates in the property insurance market. An STP allows for the removal of inventory from a property policy that may reduce an overall required property limit, thereby increasing property market options, particularly where there are exposures in CAT regions or higher risk geographies.
A stock throughput policy (STP) is a marine cargo policy designed for companies that import, distribute, or export merchandise. The policy provides cover for all moveable goods (including inventory), as well as 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. It often includes options to extend coverage to retail locations (retail stock throughput).
Benefits of an STP
- Protection: Insurance under a single STP is designed to cover all raw materials, other stocks, and finished products or commodities, whether in transit, storage, or otherwise.
- Limits: Limits apply to all perils on a “per-location” basis, allowing for a relatively low limit to provide a significant amount of property coverage. Similar to traditional property placements, major catastrophic perils such as flood, windstorm, and earthquake are typically subject to separate annual aggregate sublimits. However, aggregate CAT limits may be tailored to include separate limits for the three major perils of earthquake, windstorm, and flood, or may be extended to include additional aggregate limits as needed or desired.
- Deductibles: Lower nominal flat dollar deductibles, rather than percentage deductibles, are often achievable.
- Coverage: Coverage is designed to allow for consistent insuring conditions and a flexible approach to self-insured retention.
- Flexibility: The marine cargo insurance market is known for its ability to manuscript wording without significant regulation, thus allowing some of the more complex or less standard risks to be incorporated into the already broad cargo policy form.
- Premium: A single rate is applied to sales to create a simplified program from cradle to grave.
FAQs
A stock throughput policy (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 has three components:
- Ocean cargo insurance
- Inland transit insurance
- Property or storage insurance
STPs integrate transportation, inventory storage, material handling, and packaging and are designed to cover the repositioning of:
- Raw materials
- Works in progress
- Finished goods
The STP focus is on addressing goods throughout the global supply chain and transportation infrastructure, from beginning to end. Coverage terms typically include all goods in transit globally as well as all stock/inventory (works in progress and 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.
Purchasing an STP 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.
Why Marsh
At Marsh, we have a deep history in transport supply chain models and risk mitigation. Our industry and placement specialists can offer you their expertise and long-established relationships across global markets to identify the best market solutions tailored to your unique business needs.
With our team, you not only gain an in-depth understanding of your existing risk profile and potential gaps, but also can establish a plan for emerging challenges in your industry. And, in the event you need to pursue third parties in recourse of insured (subrogated) or uninsured (recovery) losses, our in-house reclaim services team is here to help.
