The latest Gallagher Market Overview has revealed the biggest insurance issue facing food producers across Australia.
Thanks to a number of high-profile - and high-cost - fires, both in Australia and overseas, Stephen Elms, National Head of Food Production at Gallagher, said that the placement of property risk is the industry’s biggest insurance issue thanks to the use of expanded polystyrene (EPS).
“While EPS may be the best insulation for food and beverage producers, it is also the reason insurance premiums are being driven up in the property sector,” Elms said in the report.
“Older EPS panels are highly combustible if exposed to an ignition source, and high-profile fire incidents in the last 18 months have created a scenario of reduced capacity and severe premium increases being levied by the global insurance market.”
A pair of fires in Australia, one at Sunpork in Brisbane in 2016 and another at Thomas Foods International in South Australia in 2018, served as the catalysts for the changing and challenging property market here in Australia, Elms said.
Smaller losses in Melbourne and several from around the world have helped to compound the issue with reinsurers and Lloyd’s of London now taking a hard-line approach to property risk in the food and beverage production industry.
“The first action point was the immediate increase in insurable rates being charged for any business that has EPS contained within their buildings,” Elms continued. “These premiums have risen steeply and quickly and will continue to do so for the foreseeable future.”
What can clients do?
While the risk landscape is changing, Elms noted that those in the food production industry can take measures to limit the impact on their business.
“It all starts with solid risk management and fire mitigation procedures,” Elms said.
“Food producers must strive to improve their internal risk management processes. These internal processes need to be documented so that they can be communicated and shown to insurers to confirm that businesses are doing their utmost to ensure that these exposures are being mitigated as strongly as possible.”
Food producers should also ensure that sprinkler and fire hazard protections within their facilities are of the highest standard and business continuity plans are continually fine-tuned to ensure that companies and their employees know how to respond in the event of a potentially catastrophic event.
This subject is explored in greater detail in the latest Gallagher Market Overview Report, Reflections on a year of change. The report is available as a digital download.