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PRODUCT RECALL PLANNING AND PREPARATION FROM AN INSURER’S

PERSPECTIVE

Andrew Redman - AIG

Product Recall planning and preparation from an Insurer’s perspective

• How does an Insurer assess the readiness of a food & beverage industry company for a crisis recall event

• How can an Insurer assist companies both pre and post such an event?

• What is the extent of coverage provided by the Insurance market today?”

• What is the true cost to a client of a Crisis event?

Emerging issues for Insurers

• The rise of Social Media and impact on Adverse Publicity coverage

• Geo political factors- Government Intervention, Political Radicalism/Activism

• 3D Printing

• GM Foods

• Endocrine Disruptors

• Packaging Technology , Biosensors

• Food Fraud

• Global Regulatory Environment

Recall readiness- Underwriting Factors

• Does the client make finished products, ingredients or a combination of the two?

• Quality Assurance & HACCP

• Batch Coding & Traceability

• Food Safety Certification

• Suppliers Risk Management/Supply Chain integration

• Management of subcontractors/contract manufacturers

• Number of Product Lines/Product diversification

• Geographical spread of risk

• Processing or Packaging technology used

• MPT- high profile risk /tamper evident packaging

• Recall incident and claims history- Client response to events

• Access to independent Food Safety /Public Relations / Extortion Consultants to help plan & validate/test recall plans

• Training & Recall Simulations

• Assistance in assessment of Product Liability & Contamination risk

• Site visits can provide a further source of support & validation of a company’s food safety management

• 24 hour Crisis Hot Line

• Can support company’s own resource post incident in successfully negotiating a crisis event and mitigating its extent & cost

• Claims Expertise

• Validation of action plans taken to minimise or prevent re-occurrence

How can an Insurer assist companies both pre and post such an event?

What is the extent of coverage provided by the Insurance market today?

• Throughout EMEA, insurance markets typically offer the following options:

• Recall Costs only cover ( usually with some Consultant Costs cover) embedded within Public & Products Liability insurance product

• Stand alone Contaminated Product Insurance for the Food & Beverage Industry

• Wordings are very broad and high profile claims have led to litigation around intent and extent of certain policy coverage

• Common exclusions are GMO, Carcinogens, BSE/CJD, Counterfeit Products, Growing Crops, Design Error

• Is a predominantly a first party coverage, which means that the company will be covered for its own losses

• The Insurer pays the insured’s directly

• Includes some elements of third party liability coverage, but this is often sub-limited

• May vary from country to country to conform with the local market

• Should be a “catastrophe loss” insurance, meaning that it is not meant to provide coverage for small incident.

• The goal is to avoid covering the ordinary incidents that would occur during the manufacturing process and can be easily absorbed by the client as operating expense

CPI insurance

PRODUCT

CONTAMINATION

INSURANCE

ACCIDENTAL- Accidental

Contamination

- Mislabeling

- Governmental recall

MALICIOUS- Actual tampering

- Threatened tampering

- Extortion

TR

IGG

ER

SPROPERTY

DAMAGE- Value of contaminated

(condemned) product

- Recall costs

- Destruction costs

- Crisis Management

consultant costs

BUSINESS

INTERRUPTION

- Loss of Gross Profit

- Extra Expense

- Rehabilitation Costs

-Adverse Publicity

-Customer Loss of Profits

CO

VE

RA

GE

CRISIS MANAGEMENT CONSULTANT

COSTSCrisis Management consultants offer 24/7 exclusive support to

clients for product contaminations incidents. Consultations

range from Food safety through Extortion to Crisis

Communication

SE

RV

ICE

CPI insurance

PRODUCT

CONTAMINATION

INSURANCE


Contamination

- Mislabeling




- Extortion

TR

IGG

ER

SPROPERTY


(condemned) product

- Recall costs

- Destruction costs

- Crisis Management

consultant costs

BUSINESS

INTERRUPTION


- Extra Expense


--Adverse Publicity

-Customer Loss of Profit

CO

VE

RA

GE





Communication

SE

RV

ICE

CPI insurance

PRODUCT

CONTAMINATION

INSURANCE


Contamination

- Mislabeling




- Extortion

TR

IGG

ER

S

PROPERTY


(condemned) product

- Recall costs

- Destruction costs

- Crisis Management

consultant costs

BUSINESS

INTERRUPTION


- Extra Expense


-Adverse Publicity

-Customer Loss of Profits

CO

VE

RA

GE





Communication

SE

RV

ICE

CPI insurance

What is the true cost to a client of a Crisis event?

• Insurance markets do not provide coverage for all costs of a recall event

• How do clients assess their true exposure to loss?

• What is their strategy to ensure they can survive not just frequency and larger losses but the true catastrophic loss ?

• https://www.youtube.com/watch?v=E7hUW76vUAw

• https://www.youtube.com/watch?v=zLcwFH6G8rU&featur

e=youtu.be

https://www.youtube.com/watch?v=E7hUW76vUAw

https://www.youtube.com/watch?v=zLcwFH6G8rU&feature=youtu.be

American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

Thank You for listening. Questions?

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