Stock Throughput (STP) Insurance

What is Stock Throughput (STP) Insurance?

Stock Throughput (STP) Insurance is a form of “all-risks” marine cargo coverage which provides continuous protection for goods throughout the supply chain. Coverage commences at the departure of the goods from the point of manufacture and continues whilst in storage at a third-party logistics provider or storage facility throughout transportation and ceases once the goods reach the final end user (usually a retailer or consumer).

STP is designed to avoid the need to obtain separate insurance products for each stage of supply chain journey, for example, whilst in storage or awaiting distribution. This makes it an attractive option for businesses with complex supply chains who are seeking to simplify and streamline the overall process without the need for ocean marine transit/cargo alongside inland marine insurance cover.

Who requires STP cover?

Any business with significant risk of damage to goods as linked to storage and transit should consider the coverage. Examples include food manufacturers, furniture manufacturers or other distributors of consumer goods seeking to ensure that their products are covered from the initial point of transit until the risk is transferred to the purchaser.

What does STP cover?

The policy comprises four sections, all covering goods against loss or damage during:

1. Transit inland within Australia
2. Importation into Australia from ports anywhere in the world (except sanctioned countries)
3. Exportation outside of Australia to ports anywhere in the world (except sanctioned countries)
4. Storage at your business site or at a nominated third-party logistics warehouse.

The benefit of an STP policy is that continuous cover for goods (inventory) is provided as long as the policyholder has ownership of, or responsibility for, the goods as they travel throughout the supply chain. Coverage remains in place regardless of whether the goods change from finished products or are held in storage by a third party. The policy ensures continuous protection as long as the policyholder retains ownership or responsibility for the goods.

This coverage is critical for perishable or fragile goods such as food, beverages and raw materials. Their very nature leads to an increased risk of significant financial loss as a result of any mishaps during their journey through the supply chain and is largely out of the policyholder’s control at the time loss occurs.

An STP policy customised to a business’ specific needs and requirements can effectively manage risks present throughout the supply chain providing advantages such as:

1. Continuous coverage under one insurance policy with one carrier.
2. This single policy provides a suite of coverage, avoids potential duplication and ensures no gaps in cover. Furthermore, it simplifies the claims process and eventual settlement.
3. Coverage is end to end throughout the supply chain, and on a worldwide basis across international borders (excluding sanctioned countries).
4. Lower deductibles are offered for catastrophic and non-catastrophic risks which are usually based on a fixed deductible instead of a percentage of the sum insured value.
5. The policyholder can opt for the claim settlements to be the invoice sales price, retail price or cost of the goods. This ensures that potential profits from sales are not lost because of damage.

What doesn’t STP cover?

Insurer terms vary, however common general exclusions in STP Insurance include losses arising due to:

• Intentional acts
• Damage caused by the manufacturing process
• Processing errors of inventory from raw materials into finished products
• Wilful misconduct
• Normal wear and tear of the inventory
• War and nuclear reaction
• Acts of terrorism
• The use of shipping vessels or transport vehicles not fit and proper for transportation purposes
• Strikes, civil unrest and riots
• Inventory shortages which lack physical evidence as to the cause of the discrepancy
• Vermin.

STP Claims

Claims generally covered by STP involve:

• Loss or damage to cargo/stock (from accidents, theft, natural disasters, e.g., windstorms, flooding) whilst in transit or in storage (which includes storage at third-party locations).
• Losses that occur from the initial point of product supply/storage through to the manufacture/production until delivered to the customer/consignee.

The Basis of Valuation (BOV) in STP policies is usually the “Cost Price or Insured’s selling price of the goods less unincurred expenses”. To that end, providing copies of any agreements or contract rates with customers which detail agreed values helps substantiate losses claimed.

Documentation needed when making an STP claim

1. Incident report
2. Timeline of incident (from commencement to current remediation status)
3. Damaged stock inventory summary by stock status (quantities and estimated values):

a. Raw materials (wet product)
b. Ingredients (dry product)
c. Finished product:

i. Packed; and
ii. Bulk;

4. Quality control stock damage assessment reports – again for:

a. Raw materials
b. Ingredients
c. Finished product:

i. Packed; and
ii. Bulk;

5. Advice re any stock salvage opportunities
6. Disposal process, volumes, timing and costs – for identified solutions, including:

a. Disposal to piggeries
b. Disposal to worm farms
c. Disposal to local tips (non-labelled, non-putrescent product); and
d. Disposal to deep burial (labelled/branded & putrescent stock)

7. Any other stock-related costs; and
8. Any other relevant information and documents.

Information required to obtain quotations

In order to procure quotations, insurers will require detailed underwriting information to enable them to review and rate the risk appropriately. The limit of liability amount required should be considered based on the value of sendings undertaken namely the total value of the goods received, sent, transferred, moved or in storage during any one period of insurance.

Static/storage risk component

For the static component of the risk, insurers require the following information regarding the location / premises where goods will be stored:

• Brief description of the goods in storage
• Full address(es) of the site where the goods will be/are stored
• Year of building construction date
• Construction type of the premises where the goods will be stored, i.e., concrete floor, tin roof, brick walls
• Security measures at the premises, i.e., CCTV, alarm, deadlocks on doors
• Fire protection measures at the premises, i.e., sprinkler, hose reels, smoke alarm;
• Expected date of when storage service will commence; and
• BOV required for goods – this refers to the settlement amount in the event of a claim i.e., is cover required based on stock value or retail value incl GST? (retail value generally attracts higher premium).

Cargo/transit risk component

Insurers require the following information regarding goods in transit:

• Brief description of the goods in transit
• Limits per conveyance, i.e., what is the maximum value of the goods in transit at any one time?
• Annual sendings, i.e., annual value of goods which are imported into Australia, exported out of Australia and within inland Australia
• Method of transit, i.e., are goods transported via sea, road, rail or air?
• BOV required – this should be determined based on the shipping agreement in place, i.e. Cost Insurance Freight (CIF) + 10%
• Packing details, i.e., how are the goods packed, is packing undertaken by a third-party?

In short, undertaking and transacting business in the current global marketplace presents many challenges and the transit of international inventory through the supply chain creates significant risks to businesses. STP Insurance provides a prudent risk transfer device for businesses operating in this space.

For further information or to obtain a quote, please contact a Bellrock Advisor.