Stock-throughput insurance coverage in Marine Cargo Insurance

Providing a STOCK-THROUGHPUT INSURANCE COVER or avoiding it?

Excluding stock-throughput coverage in a Marine Insurance reinsurance treaty agreement is a norm.

However, if you check with your peers the exact nature or meaning of what stock-throughput means, nobody seems to be able to explain…. Some said, there is a prolonged storage extension (i.e., 120 days extension) to the storage after and before the marine voyage. Some commented the voyage involves factory-liked processes or some erection activities being done at some stages of the journey. Yes, they are not wrong with the explanation, however there are more to this.

Stock-throughput extension cover in marine cargo insurance in its original concept was actually about combining a marine transit All Risks policy together with a Stock policy or Warehouse / Storage policy. That’s as simple as it gets.

Evolving form…. The concept then expanded over time including turning raw materials shipped into some form of finished (or semi-finished) product during the transit. Usually marine underwriters will only want to provide such extension to very light or soft processes, like non-industrious cutting, sorting and repackaging. But because over a period of time some naïve or half-baked underwriters made stupid mistakes by allowing light manufacturing processes within the journey to creep into the coverage, resulting in an overly flexible coverage structure.

The current stock-throughput form…. In view of those aggressive developments that direct marine underwriters allow for such stock-throughput extension it is imperative that capacity providers start turning the the table around by inserting such exclusion within the reinsurance treaty. While this exclusion is inserted in the treaty it is generally acceptable that this exclusion is to exclude any form of factory-liked or erection or manufacturing processes being carried out within the various stages of the marine transit and storage….


Watching your back….

“While Stock-throughput cover is a usual exclusion in any marine reinsurance treaty it is generally common knowledge that this exclusion is meant to exclude any form of factory-liked or erection or manufacturing processes being carried out within the various stages of the marine transit and storage…., however, it is not intended to exclude light sorting and repackaging processes. It is also not intended to exclude extended storage either if the extended time-frame is not in excess of 120 days….”

How do you detect from any broking placement slip if the risk is being placed on a stock-throughput basis?

The following wordings within the slip may provide some inklings of stock-throughput element:

  1. This insurance is extended to cover insured interests whilst in storage and/or including various works in progress during such storage. Usually the policy is on an annual basis but this can also comes in the form of a single (but with extended storage and with processes) but prolonged voyage.
  2. There is an extended storage requirement, which usually drags beyond the usual 30 days or 60 days standard storage allowance in the basic marine cargo policy. You should ask about this, especially to check for processes involve – processes like unpacking and repacking should be properly examined (especially where machienries are being used as if the processing environment is more of a factory-liked setting) to ensure that the marine policy does not pick up unnecessary coverage that your treaty reinsurance is not about to cover….
  3. Clear cut form would involves the following use of wordings….
    • Worldwide cover….
    • “… from the time of leaving the suppliers and/or manufacturers factory, store or warehouse or else where as may occur and continues whilst goods are at EXPORT PACKERS and/or freight forwarders and/or packers and/or consolidaters and/or hauliers and/or warehousemen and other bailees and/or agents premises and/or elsewhere BEING PACKED and/or COLLATED and/or GROUPED TOGETHER and/or stored and also covered whilst awaiting shipment thence in transit….”
    • “…. raw stock and materials in trade or work in progress….” and/or “….the basis of valuation for finished stock sold but not delivered to be at the Assured’s selling price after all discounts and uninsured expenses”
    • Interest Insured is likely described in the following form (very comprehensive….): “… All real and personal property of the Insured, of every kind, nature and description, or for which the Insured is responsible or in respect of which the Insured receives instructions to insure….”
    • Cross-docking, trans-loading, De-Containerizing (DC) by-pass and direct to store programs, Multi-Country Consolidation programs or Special handling services are mentioned….
    • All locations mentioned (usually very briefly worded….) – including at insured’s locations, sub-contractors, consolidators, warehouseman and/or cover at manufacturing locations
    • It is a norm…. for underwriter to watch out if there are a PROCESS CLAUSE added into the slip.

Process Clause: This insurance remains in full force whilst the subject-matter insured is under any process but in no case shall extend to cover damage thereto solely caused by such process.

(Note: Process Clause is currently being reviewed by the Joint Cargo Committee in London. It is hoped that there would be a JCC approved version of this clause. Presently there are many versions of this clause and a careful attention to the wording is therefore required.)

When encountering such wordings…. it is wise to ask, you’ll be surprised to discover things are not what they were being painted out to be.

A marine policy that insures high-valued inventory and the flow of goods from the source of production to the consumer. It evolved out of the Manufacturer’s Output Policy in the 1970’s when manufacturers began to outsource work to developing countries.


  • Ocean Cargo Insurance
  • Inland Transit
  • Property/Storage/Simple Processes

It integrates transportation, inventory storage, material handling and packaging (in recent times, extended to include factory-liked processes) as it covers the repositioning of:

  • Raw materials
  • Work in progress
  • Finished goods

Coverage can be written as either Direct Insurance, Reinsurance or on a Master/Controlled Program. The focus is on Global Infrastructure and Local Presence from beginning to end.

It is good to know in most reinsurance treaty agreement the intention is to exclude stock-throughput coverage involving extremely long storage period and also with factory-liked processes being carried out within any marine voyage and inland transit…. 

Do you agree with me? Tell me your side of the story…. Your comment below is valuable for other readers.


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9 comments for “Stock-throughput insurance coverage in Marine Cargo Insurance

  1. Jason Yeh
    June 9, 2015 at 15:11

    Hi, I came across this interesting article and discussion, and learnt that the storage portion of STP policy must follow a fire tariff rate in Malaysia. I am interested to learn more! Is this tariff still in effect? Are you able to provide me a copy same as stan’s request in his reply?

    • July 7, 2015 at 22:32

      Yes, if there is a prolonged storage not common done this way and not in the course of transit the Malaysian Fire tariff applies. Let me check how I can send a copy to you. Anyway, if I forget please remind me.

  2. MalaysianTariff
    May 10, 2012 at 22:02

    Hi, my understanding is that Marine Storage Rate in throughput policy must comply with the minimum fire tariff rate (if storage period > 30 days). My question is, what happens if the storage rate charged is below the fire tariff rate but the overall premium for the risks is sufficient to cover the risk ?

    • May 11, 2012 at 16:16

      You are correct as the fire tariff has provision to counter cargo rate for extended storage going below tariff rates in respect of storage. Marine cargo underwriters must check to ensure the rating component for extended storage is not below those of tariff..
      Anyway, PIAM is still not equip with enough auditors who understand cargo underwriting to deal with this form of auditing.

  3. Jay
    March 18, 2012 at 22:56

    It is usual for marine underwriters to exclude those risk aspects that fall or almost alway will fall within the ambit of the non-marine risks category. It has been traditional that marine underwriters alway watch the marine borderlines so as not to encroach into the non-marine territory. Although we alway almost refer this to tradition but it is usually the case of treaty or authority restrictions that govern such decision making of avoiding non-marine risks. Secondly, marine underwriters do not want to write into a territory that they are not familiar with.

  4. February 22, 2012 at 08:33

    This means the extended storage within 120 days is allowable and not deemed as any stock throughput feature?

    • February 25, 2012 at 21:51

      Usually it is good practice to limit extended storage to not more than 120 days but in Malaysia do not this extended period is subjected to the Malaysian Fire Tariff rating and terms. This must be complied…. although most marine underwriters could not be bothered with this tariff section. It is best to check with your treaty reinsurers whether they are agreeable to this 120 days limit.

      • March 1, 2012 at 08:13

        Are you able to provide me with a copy of this fire tariff section that states the need for cargo underwriters to comply with?

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