Navigating property & casualty risks in the food and beverage industry

The risk landscape facing food, beverage and agriculture businesses is rapidly evolving. In property, there’s growing awareness of the hazards associated with some food and beverage facilities and activities, as well as the rising physical threats associated with climate change.

In casualty, new and emerging food-related health risks and supply chain issues are a cause of increasing concern. 

As a result, property and casualty (P&C) insurers are restricting cover or increasing rates for some types of risk which they consider problematic. Firms may find it more challenging to get the insurance they need at an acceptable price.

How is the risk landscape changing?

Here are some major concerns insurers may have about the nature and quality of property and casualty risks in food and beverage.

Property

• Construction: Many food facilities use panels in their construction. They can be cheap and provide good insulation for products that need to be frozen or kept cold. However, some types of panels are highly flammable.
• Occupancy: Many activities can be hazardous, such as deep fat frying. Even seemingly harmless powders have the potential to cause explosions during blending.
• Protection: Many food businesses work out of older premises, so their physical risk prevention systems might not be up to modern standards.
• Exposure: The location of premises may expose businesses to weather and climate-related risks, such as flooding and wildfires.

Casualty

• Regulation: Changes in safety regulation have led to increased recalls of food and beverage products. Consumers are more aware of risks and better informed of their rights leading to higher claims.
• Food-related health incidents: The globalization of food supply chains has led to an increase in the severity of food-borne illnesses caused by contamination.
• Traceability of supply chains: With complex supply chains, it’s become harder to determine responsibility for product safety or achieve full traceability for all ingredients.
• Class actions: The market has seen numerous class actions over issues such as mislabelling, which contribute to pressures of economic and social inflation.

What can you do to get ahead of emerging challenges?

Differentiate your risks through data: Property insurers often class all food and beverage businesses together, but the risks associated with different sub-sectors, business types and locations can vary hugely.

The more data and information you can present to differentiate and quantify your risks, the more likely you are to get better cover terms and prices.

Update your risk control measures: Review your procedures for managing key risks such as fire and flood. For example, make sure you have procedures for correcting or repairing damaged panels and that all combustible materials are kept well away from ignition sources.

Strengthen your food safety protocols: Consider using a third-party expert to audit your food safety practices and carry out supplier audits to make sure they comply with your requirements.

Other possible measures include using tracking technology to monitor and assure traceability in the supply chain by batch or lot number.

Update your valuations: After recent inflation spikes, property valuations in food and beverage may no longer reflect the cost of claims.

This can leave you underinsured and cause problems at renewal. Review your current values with an approved valuation firm.

Conclusion

Food, beverage and agriculture businesses can face barriers getting the property and casualty cover they need at an acceptable price, often because of insurer perceptions of their risks that are not justified in reality.

WTW can help firms understand and differentiate their risks and present them to insurance markets in a way that can help increase available cover while driving down prices wherever possible.

Author

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Simon Lusher

Global Food and Beverage Leader

email Email phone +44 7436 049588

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