Rising Food Recalls and Associated Risks
The recent Morrisons product recall due to blue plastic contamination fears is a stark reminder of the growing trend of food recalls across the retail sector. According to the Food Standards Agency, 2024 saw 127 food recall cases, marking a 10% increase from the previous year. This rise in recalls highlights the complex operational risks food manufacturers face, including product contamination, supply chain disruptions, and property damage.
Broader Operational Risks
Beyond product recalls, food manufacturers must contend with other pressing issues. Tim McGain, regional head of property at Allianz Commercial, notes that “the main insurable risks to food manufacturers are generally shared with any other manufacturing operation, such as managing the risk and impact of large fires, flooding and storm damage to manufacturing and distribution property.” Recent weather patterns have disrupted agricultural distribution, with Leicestershire arable farmer Joe Stanley expressing frustration over unsustainable weather and climate-related risks affecting annual cropping.
McGain emphasizes that pauses in operations have a heightened effect on food manufacturers due to the need to ensure food safety and animal welfare. “The impact of those losses may be felt more severely for food manufacturers given the need to ensure and prioritise food safety and animal welfare in any mitigation and recovery strategies,” he said.
Liability Considerations
From a liability standpoint, James Raven, senior liability underwriter at Allianz Commercial, notes that while public/products liability is not typically a top concern for the food industry, product recall and property/business interruption are significant priorities. A 2024 survey by ETQ found that recent recalls have led to employee layoffs (33%), downtime from plant shutdowns (29%), negative effects on brand reputation (24%), and increased remediation costs (24%).
Raven emphasizes that while insurance can cover certain costs associated with product recall, “the main risk for the customer remains their reputation.” Genuine sustainable business practices can help mitigate this risk and protect against ‘public nuisance’ claims. Brokers play a crucial role in raising awareness and ensuring detailed risk information is available.
Essential Coverage Considerations
Brokers should consider various coverage options for food manufacturers, including:
- Product recall insurance
- Property insurance (business interruption)
- Cyber insurance
- Product liability insurance
- Environmental liability insurance
- Equipment breakdown insurance
- Supply chain insurance
- Food contamination coverage
Impacts of Sustainable Practices
Sustainability in food manufacturing has various impacts. Insurers prioritize partnerships with customers having clear ESG, sustainability, and resilience goals. However, sustainable practices must be genuine to avoid ‘greenwashing’ allegations and related reputational risks. Clear, transparent exposure data is essential for quantifying risk with a fair premium and coverage.
Brokers can assist with adopting sustainable practices by:
- Conducting risk assessments of new technologies
- Advising on suitable insurance coverage for sustainable assets
- Facilitating risk dialogue between clients and underwriters
- Encouraging transparent disclosure of sustainability plans
By understanding these risks and implementing appropriate risk management strategies, food manufacturers can better navigate the complex landscape of operational risks and liability considerations.
