As the global economy expands, many businesses have more exposures related to the transportation of their goods, both domestically and internationally. Traditionally, the responsibility for insuring goods traveling overseas 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 began to devise a type of marine coverage that could address this gap—something called a stock throughput (STP) policy. An STP policy provides end-to-end coverage for the insured’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—including works in progress and finished goods—while in transit. An STP policy can help provide continuous coverage to inventory throughout the entire supply chain.
STP policies are growing in popularity for a variety of reasons. Benefits of this type of coverage include the following:
There are no 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 sublimits 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.
Although wholesale, retail, and food and beverage industries have historically benefited the most from STP policies, any industry sector with significant inventory and transit exposures can benefit from them.