Stock Throughput and Cargo Insurance Presented by: Lisa Rodriguez, ARM Area Vice President Arthur J. Gallagher Risk Management Services May 26 th, 2009

AGENDA  What is a Stock Throughput Policy?  Origin of Policy – mid 1970’s  What is covered  Examples in the market

What is a Stock Throughput Policy? Definition: 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. Components: Ocean Cargo Insurance Inland Transit Property/Storage

COVERAGE It integrates transportation, inventory storage, material handling and packaging 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.

COVERAGE TERMS  Goods in transit world wide – ocean/air/inland  Stock – Raw Materials, “work in progress” & Finished Goods  All locations – including at insured’s locations, sub-contractors, consolidators, warehousemen Includes cover at manufacturing locations Subject to process clause

FLEXIBILITY The policy provides the flexibility to choose between different channels which is a key enabler for creating a strong, cost-effective supply chain model. Full Container Loads (FCL) Consolidation Special handling services Less than Container Loads (LCL) and Multi- Country Consolidation programs Sea/Air and Air/Sea programs Sea to Air conversions Cross-docking, trans-loading, De-Containerizing (DC) by-pass and direct to store programs Export and import distribution centres

Typical Coverage for Movable Assets Ocean Marine Policy Inland Transit Policy Local Property Policy Inland Transit Policy Suppliers Insurance? Local Property Policy Warehouse / DC Facilities Final Destination Export Domestic Suppliers Insurance? Final Destination Local Property Policy

Stock Through Put Program Stock Trough Put – Seamless Warehouse / DC Facilities Final Destination Export Domestic Final Destination

Who should consider a Stock Throughput? Any business with high volumes of inventory held in warehouses with moderate to high transportation exposures. Such as:  Manufacturers  Distributors (wholesale and retail)  Exporters/Importers  Logistics Services Providers  Warehouse/Storage Companies  Transportation Companies

Integrated logistics solutions Supply chain development End-to-end supply chain visibility Import and export Warehousing and distribution Destination Export Documents Customs Import Documents Customs Origin Inland Transit Storage + One Insurance Policy Covers All Transportation & Storage Exposures Storage Inland Transit

ADVANTAGES  Menu Driven – coverage can be tailored to the client’s needs  Broader terms and premium savings over property markets/manuscript form  Coverage for earthquake, flood and windstorm  Lower deductibles  Seamless coverage – “cradle to grave”  Greater capacity – limits up to $250MM  Combined with property policy can lower deductibles, create/protect capacity and increase catastrophe coverage.  Profit Sharing Commissions

DISADVANTAGES  No standard forms – everything must be negotiated (nothing can be assumed)  Must coordinate with property underwriters  Premium credit under property policy can be insufficient to off-set price of STP policy

MARKETS  AJG Lloyd’s Facility  London / European Underwriters  AIU  Starr Indemnity  ACE  FM Global  US Domestic Underwriters Navigator's Chubb Liberty Mutual Fireman’s Fund Travellers Many others

MARKET CAPACITY Exclusive AJG London Lloyd’s Facility

UNDERWRITING  Need C.O.P.E. information Construction type and Area of the facility Occupancy Protections and security measures Exposure – description of values at risk  Transit values – annual volumes split Inland / Overseas (average and maximum/turnover)  Stock values – Schedule  Annual sales  Three / Five year Losses for transit and stock

RATING  Usually one rate on overall sales  Annual premiums based on projected sales  Annual adjustments based on actual sales  Profit Sharing Commissions range from 5% to 25% of policy premium

EXAMPLES  Agricultural or Wine Manufacture and Distribution Will not include the harvest, but can begin with “goods in process” until point of sale  Leather goods manufacturing and distribution Will not include livestock, but can begin with “goods in process” until point of sale  Electronics’ Importing and distribution Warehouse to warehouse including customs, land/air and or ocean voyages Warehouse to retail clients

Q&A Thank you