Stock throughput policy
A policy that covers a company's goods in a single contract during transit and while stored in warehouses, from supplier to end customer, with no gap in cover between the two.
Traditional cargo insurance covers goods in transit, and property insurance covers them at the company's premises. Between the two, extended stays in warehouses, port areas or at a subcontractor may fall into a gap in cover, or be covered twice. The stock throughput policy, born in the marine market, brings these phases together: it covers a company's inventory wherever it is, in transit or in storage, on a valuation basis and with limits per location and per conveyance. It suits global supply chains, where the same goods pass through several countries and warehouses before being sold. For the underwriter, the difficulty is accumulation: large values may concentrate in a single warehouse exposed to natural catastrophes, as losses from major storms and port explosions have reminded the market.
The Beirut port explosion on August 4, 2020, set off by some 2,750 tons of ammonium nitrate stored there for years, instantly destroyed goods in transit and in port storage, illustrating the accumulation risk that a stock throughput policy concentrates in a single location.
stock throughput, STP, stock throughput policy
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