Providing a STOCK-THROUGHPUT INSURANCE COVER or avoiding it?
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:
- 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.
- 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….
- 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.
It integrates transportation, inventory storage, material handling and packaging (in recent times, extended to include factory-liked processes) as it covers the repositioning of:
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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