Stock Throughput and Marine Cargo
An introduction to Stock Throughput and Marine Cargo for UK Businesses
Stock Throughput / Marine Cargo is a specialist form of insurance that meets the needs of many differing companies by providing coverage under a single policy for all of your stock and transit requirements. This approach can often lead to substantial premium savings when compared to more traditional policies when movement of stock is high.
The origin of the current Stock Throughput / Marine Cargo policies can be traced back to “Manufacturers Output” policies that were very much in vogue in New York during the 1970’s.
This type of insurance is suitable for virtually any Importer, Exporter or Distributor, and is most beneficial to manufacturers.
Although this example is for a US based risk, the importance and benefits of this cover is relevant to UK based businesses.
Traditionally a manufacturer might have several different policies covering their stock and transit exposures, ranging from an ocean marine policy to a stock policy to a separate policy for inland distribution. These policies are often effected with different insurers. Where one policy stops and another policy incepts there is scope for either an overlap in coverage or a gap in cover. This potential duplication or gap in cover can cause you major issues in the event of a loss, and this can be further aggravated if two different insurers are involved.
Under a Stock Throughput / Marine Cargo policy all transit and stock exposures are covered under a single seamless policy with the same underwriter which eliminates any possibility of a gap in cover or a duplication of cover.
An example of a Stock Throughput / Marine Cargo would be a clothing manufacturer who purchases cloth in the Far East and then ships it to a subcontractor in Mexico to be cut and then trucked to another contractor to be sewn into clothes. The finished clothes are then trucked to your warehouse in America where they are broken into lots and distributed to the assureds clients.
As can clearly be seen there are a number of separate transit exposures along with storage and processing exposures. Under a traditional insurance arrangement, you might have an ocean cargo policy which would cease when the goods arrive at the cutters. They would then have a separate policy to cover the goods whilst at the processors and being moved between them. A third policy would be in place to cover the transit between Mexico and the US, and a fourth policy would cover the US warehouses and the distribution within the US.
Clearly if all of these exposures could be covered under a single insurance policy there would be benefit to you and your business, and that is exactly what a Stock Throughput / Marine Cargo insurance policy is there to achieve.
In addition to the above other advantages of a Stock Throughput / Marine Cargo policy are:-
1. A single seamless policy to cover all of your transit, storage and processing exposures. It should be noted that Stock Throughput / Marine Cargos generally include a process clause. (What this clause does is to maintain insurance coverage during any process but to exclude losses as a direct result of the process. In the example above if there were a fire in the processors location whilst the goods were being cut that would be recoverable, however if they simply cut the cloth in the wrong shape that would not be covered.)
2. All people trade in different ways and each Stock Throughput / Marine Cargo policy is tailored to your individual needs and requirements.
3. Whilst it is essential you understand your exposures and method of trading, once set up Stock Throughput / Marine Cargo are very easy to administer. Declarations are not normally required. This gives rise to several benefits. It saves an assured a lot of administrative time and cost It eliminates the possibility of you accidentally failing to declare a shipment, and because there are no declarations it is not possible for underwriters to charge overage steamer additional premiums on older vessels.
4. Generally the scope of coverage offered is much broader in scope than that afforded by traditional insurance coverage.
5. The basis of valuation is flexible and designed to meet the requirements of how a client trades. Whilst standard insurance policies would insure imports on a basis of valuation of CIF+10% under a Stock Throughput / Marine Cargo this would normally be replacement cost at time of loss, however where goods have been pre-sold the basis of valuation could be increased to the assured selling price less any un-incurred costs and expenses. When insurance is effected on a selling price basis of valuation this has the added benefit of substantially reducing your requirements with regard to business interruption insurance.
6. Stock Throughput / Marine Cargo policies automatically include contingent coverage for your CIF purchases and C&F sales. It is also possible to extend a Stock Throughput / Marine Cargo policy to include exposures that would not traditionally fall to marine underwriters. It is possible to include stock in retail stores if the assured has their own sales outlets, and it is also possible to include machinery and equipment as well as furniture fixtures and fittings if the assured leases their premises and as such has no buildings insurance.
To find out more about Stock Throughput or Marine Cargo and whether it is right for you, please contact us on 0800 216 962 or fill in our short form and let us call you.