Stock Throughput Policy

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What is and STP and what does it protect? Find out here.

As the global economy is expanding, many businesses have greater exposures related to the transportation and housing of their goods between the factory and their final destination, both domestically and internationally.

The responsibility for insuring goods traveling overseas traditionally fell on freight forwarders, while local insurers would provide coverage for cargo within the country.

However, that arrangement led to potential gaps in coverage when loading and unloading cargo.
 
In the 1970s, insurers starting creating a type of marine coverage that could address this gap and they called it a stock throughput or STP policy.

An STP policy provides end-to-end coverage for a company’s cargo, both on land and on water.
 
An STP policy is meant to provide protection for the flow of goods from the production point to the final destination, typically covering physical damage to inventory.

This includes works in progress and finished goods during transit.

Stock throughput policies are growing in popularity for a variety of reasons, which include:
 
* They eliminate coverage gaps. Coverage begins the moment the insured assumes an interest in the covered goods and ends as soon as interest ends, even if the goods are in the hands of a third party.

* There are no time limitations. Coverage continues as long as the insured has risk, regardless of whether the goods are in transit or in storage.

* There is a competitive rating structure.

* Deductibles are low for goods in storage or detention, even in earthquake and windstorm zones.

* Liability limits are high. Limits can exceed $100 million per location.

* Catastrophic coverage is significant. STP policies cover perils that would otherwise be subject to sub-limits in property policies.

* The goods remain insured regardless of the terms of sale, as long as there is still an interest in the goods at the time of loss.

* STP policies help manage premium expenses by providing a choice of distribution channels. This flexibility can lead to more control of the supply chain and increased purchasing volume.
 
Any industry sector with significant inventory and transit exposures can benefit from a stock throughput policy so consider whether an STP policy is right for your organization.

Please contact us with questions about any insurance or risk management topic. We will see you again soon!

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