By Michael Boscaino —
Many retailers in riot-torn U.S. cities are learning the hard way that their property insurance isn’t nearly enough to cover the cost of inventory lost to looters.
And even if they do file a theft or damage claim, the insured value of their lost inventory is usually based on its replacement cost—not its retail value.
But there is an alternative to traditional property insurance that can provide more comprehensive coverage to retailers: Stock Throughput Insurance.
Stock Throughput Insurance, sometimes called “Thruput”, is an “all risks” marine cargo policy that provides end-to-end coverage for goods beginning from the moment they leave the factory, through transit and delivery, all the way until they are sold–or not sold, as the case may be for many high-end retailers following the recent protests. Moreover, the value of the loss for claims purposes is linked to the final sales price—not replacement cost.
In addition to providing more robust coverage than traditional property policies, Stock Throughput Insurance often has lower premiums and deductibles. Many Stock Throughput Policies also include profit-sharing clauses that refund up to 25% of the premium if no claims are paid.
Coverage terms also are generally better than traditional property policies. For example, there are usually no individual shipment or location reporting requirements, and premium can be based on sales turnover volumes. Coverage also applies regardless of where the inventory is being held. So, a retailer won’t have to specify those locations, whether it’s on a loading dock, at a shipyard, in a supplier’s warehouse or aboard a semi-tractor-truck traversing the interstate.
Stock Throughput Policies also provide catastrophe (CAT) coverage, which is especially important since many imported goods are shipped to warehouses in CAT-prone areas, such as major U.S. seaports along the Eastern Seaboard or West Coast.
While the hardening property/casualty market is presenting some challenges to securing sufficient coverage limits for retail inventory covered by a traditional property insurance policy, marine market insurers have been willing to take a portion of the risk, sharing it with other insurers on a quota-share basis, to ensure buyers obtain the limits they need. The U.S. property market is less apt to accept such an arrangement. As a result, most brokers typically must arrange excess coverage above a primary policy to obtain desired limits. This can create coverage gaps if a claim pierces the excess layer and the excess policy doesn’t follow the terms of the primary policy form.
Increasing demand by retailers becoming aware of the availability of Stock Throughput Insurance is creating some competition for this coverage, which could lead to price increases. Underwriters as a group say they are overwhelmed by the number of new business submissions, and many have fulfilled their premium goals for 2020. They also are reeling from the recent riot and looting claims.
But even though placements may be difficult to arrange right now, they are still possible, and a broker who has strong relationships in the marine market and who understands the nuances of Stock Throughput Insurance can make sure your inventory is covered.