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Insurance Market Update

Willis Towers Watson’s update on markets that matter to the food and drink sector

Risk & Analytics
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By Sue Newton | February 14, 2020

The insurance market has continued to harden across all sectors for certain classes of business, but is particularly difficult for businesses in the Food & Drink sector. This insight summarises insurers’ appetite and capacity, class by class, along with the impact of this on rating levels and premiums. 
Property
  • There is a difference in ‘appetite’ between ‘Food’ and ‘Beverage’ production in the marketplace, with Beverage risks being more attractive than Food.
  • The food sector is experiencing challenging times in the marketplace. Insurers are reducing capacity, increasing deductible levels and increasing premiums as a hard market bites.
  • The key to a successful renewal is to be focused on the ability to evidence good risk management. This includes property loss control work and business continuity planning.
  • It is vital to know the make and type of any composite panels and be able to detail any active panel replacement programme.
  • Understanding and being able to articulate business interruption dependency per site is equally critical.
Motor
  • Remains relatively stable, but challenging for heavier HGV fleets. It is possible to get flat rates from holding insurers, but many are seeking rating increases of 5% to 10% even on good risks, based on Ogden / claims inflation and MIB levy increases.
  • Claims cleansing and effective Risk Management are vital in achieving best terms.
  • Markets prefer multi-line deals including Property Damage and Casualty. Some insurers decline to quote stand-alone Motor business.
  • Following our exit from the EU, there is no change of requirements in relation to green cards during the transition period. At this stage it is not clear what the position will be from 1.1.21. We will keep clients advised when the position is confirmed.
Liability
  • Appetite for food risks in the market is still strong but retention structure and claims performance is key.
  • Reductions are being achieved for good quality risks. Primary rates are generally flat for risks with healthy claims performance, but increases of at least 10%-20% are being sought by Insurers where claims performance is below expectations.
  • Profitability for Insurers is the key objective.
  • Cross-class deals remain available and often achieve the best marketing results as economies of scale are achieved.
  • A number of Insurers are reducing excess capacity which can lead to enforced structural changes which could also have an impact on pricing.
  • Allergies are a key underwriting consideration, so risk management information about how customers segment the work place to ensure no cross-contamination may be required, as well as clarity about liability arising from mis-labelling.
Directors & Officers Liability
  • There has been a further hardening of the market:
    • SME Companies are experiencing increases ranging from 10% - 30%
    • Large Private Companies are experiencing increases ranging from 20% - 80%
    • Small Listed Companies are experiencing increases ranging from 25% - 100%
    • Large Listed Companies are experiencing increases ranging from 30% - 300%
  • The higher end of the premium increase range relate to companies who are experiencing financial difficulties, have a poor claims experience, or an ADR (American Depository Receipt) exposure.
  • Deductibles are being introduced on larger plc’s. These only apply to the company, not to individual directors.
Cyber
  • While the Cyber insurance market remains competitive, insurers are challenging price decreases and expanded terms in light of rising claims and losses.
  • Business interruption claims are on the increase and the costs associated with managing cyber and privacy claims, including forensic investigations and defending regulatory actions with associated fines, are also on the rise.
  • As such, renewal pricing currently ranges from flat to 15% increases depending on security controls and privacy protections in place.
  • While insurers are open to providing additional industry specific coverages beyond the standard, these are being more closely scrutinised and often attract an additional premium.
Marine
  • The Marine Cargo market has continued to harden with a strong market push to get rates/premiums up by 7.50% to 15% - even on profitable business.
  • Insurers are either declining to renew or asking for (and getting) price increases of 20% + on poorly performing business and/or risks on the periphery of underwriting appetite.
  • There is reducing appetite for certain types of goods, including perishables and temperature-controlled goods.
  • Insurers are asking for more risk information than ever before even on their existing business.
  • Policy conditions are being scrutinized, often resulting in increased deductibles and/or new or additional Warranties.
Product Contamination and Recall
  • The market continues to harden, meaning higher rates and more defensive underwriting (lower limits, higher insured retentions and more narrow coverage).
  • Some Insurers are exiting the space; Pembroke and Axis exited in Q3 2019. However, other Insurers have entered (HDI Specialty).
  • We are seeing a variety of claims for mislabelling and foreign body contamination. In general, product recall incidents appear to be rising in line with the trend for the last 10 years.
  • Some coverage changes are occurring, specifically with regards to recalls caused by cyber perils. As part of an overall market dynamic, Insurers are reviewing the applicability of cyber issues to recall, and are amending their offerings accordingly.
  • Willis Towers Watson's position is that the market should be covering recalls caused by ‘cyber’ issues, including manufacturing facility hacking, or the use of computer programmes to change product specifications with the intention of causing harm. This is something we will continue to push in 2020.

If you would like to know more, please contact a member of your Client Service team, or your account manager, or contact our Food & Drink Practice Leader, Sue Newton.

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Sue Newton
Food & Drink Practice Leader

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