Morrisons recently announced a product recall due to fears of blue plastic contamination, an incident that reflects a broader rise in food recalls across the retail sector.
According to reporting by OAL, the Food Standards Agency identified “127 food recall cases” in 2024, marking a 10% increase compared to the previous year. As Tim McGain (pictured left), regional head of property at Allianz Commercial, explained: “Risks are also changing in the industry as automation of processes changes, and focus on added value products increases, the complexity of business operations, with potentially more single points of failure in the process flow and less options to work-around interruptions.” He added that brokers, risk engineers, and underwriters can offer valuable guidance “recommending best practices for design, mitigation and business continuity strategies alongside providing risk transfer capital.”
As well as product recall, there are other pressing issues for food manufacturers.
According to McGain: “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.”
According to a recent report by Farming UK, recent weather is disrupting agricultural distribution. Leicestershire arable farmer, Joe Stanley, captured the mounting frustration, telling Farming UK: “Weather and climate related risks are becoming unsustainable for annual cropping… We’ve gone from far too wet across much of England in the autumn, to far too dry now. We got 10mm of rain in April, but otherwise we’ve had no rain for more than two months and a heatwave this week.”
McGain added that for food manufacturers, pauses to operations have a heightened effect: “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.”
From a liability standpoint, James Raven (pictured right), senior liability underwriter at Allianz Commercial, said: “Generally we don’t see public/products liability high up the list of concerns for the food industry – rather recall and property/bi would be greater priorities.”
A 2024 survey by ETQ found that the impact of recent recalls has been “employee layoffs (33%). This was closely followed by downtime caused by plant shutdowns (29%).”
In addition, “Many of these businesses have had to manage the negative effects of the recall on brand reputation (24%) and customer satisfaction (24%). On top of this, 24% also experienced increased remediation costs, while 17% were forced to delay product introductions.”
According to Raven, insurance, “will only cover certain costs” when it comes to product recall, but “the main risk for the customer remains their reputation.”
This is echoed by the same survey by ETQ which found that “22% of food and beverage companies cited brand reputation as the biggest impact of poor quality.”
Raven believes that “genuine sustainable business practices can help to mitigate this risk” and aid against ‘public nuisance’ claims.” He added “brokers can play a key role in this, by raising awareness and ensuring that enough detailed risk information is already available in the submission or with facilitating risk dialogues.”
Brokers should consider the following coverage options, depending on the food manufacturer’s profile :
Sustainability in food manufacturing can have various impacts.
“Insurers will seek and prioritise partnerships with customers who have clear ESG, sustainability and resilience goals,” said McGain. “These types of customers typically make informed investment decisions which support risk resilience within communities alongside the business itself.”
Raven warned, however, that sustainable practices have to be genuine. “As sustainability is often used in the food industry for marketing, it might enhance the possibility of ‘green washing’ allegations and related claims which can also lead to reputational risk for both the customer, but also for the insurer,” he said.
McGain also noted that sustainability practices should be carefully managed to avoid inadvertently introducing new risks. “For example, the use of combustible thermal insulation, timber construction, adding solar panels to roofs, increasing use of lithium-ion battery powered equipment and on-site recycling activity have all been drivers of increased loss activity and severity for property insurers in recent years,” McGain noted.
Clear, transparent exposure data is essential. “The clearer the exposure, the easier it is to quantify the risk with a fair and adequate premium and coverage,” said Raven. He added that brokers are “instrumental in ensuring detailed risk information is shared early - supporting more accurate underwriting and safeguarding both insurers and customers in the event of a claim.”
Brokers can also assist with the adoption of sustainable practices via:
