the impact of trends in the food industry on risk management
TRANSCRIPT
Underestimated Fire Risk in the Food Industry in Europe
The food and beverage industry is one of the largest sectors in the world.
The total volume of world food exports was close to
$1.5Tin 2014
Source: The World Trade Organization (WTO), International Trade Statistics 2014
Production costs are
Profit margins are while
Incr
easin
gdecreasing
Manufacturers are facing increased pressure
Faster Production
Larger Facilities
Just-in-Time Delivery
New Production Methods
– to stay competitive
Manufacturers are facing increased pressure
New, More Diverse and Exotic Products
Lower Prices
– to meet the expectations of consumers who want
Manufacturers are facing increased pressure
For Hygiene On Ingredient Transparency on Packaging
– to adhere to regulatory requirements
Even well-known brands use suppliers/manufacturing facilities in countries with varying degrees of safety standards in place,
leaving them vulnerable to unknown exposures and often leading to large losses.
Despite the industry’s focus on growth and innovation,
most production units have major deficiencies or are inadequately protected against fire.
In Germany
only 2% of food production facilities at risk of fire are equipped with sprinklers.
Source: The German Insurance Association (GDV)
What are leading causes
of fires in
production facilities?
Human Error Working Processes Production Facility Defects
Sometimes new hygiene regulations contradict fire protection measures in food production.
Leading Causes of Fire
7 24 18 18 26 31 26 34 15 34 33 29 36 34
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
12
2015
Total Loss in Million Euro
Number of Losses
Average Loss in Single Claim
€124.6
€283.6
€707.9
€1,159.8
€552.9
€220.2€183.4
€533.5
€304.2
€983.9
€557.8€557.5
€459.9
€257.0
€104.6
Large losses are increasing.
Single claims are getting larger.
Note: Based on claims from January 2001 to September 2015 Source: Gen Re Research
What should insureds do?
Ensure fire resistant separation of
hazardous facilities(e.g. deep frying,
storage of flammable liquids, etc.)
Divide facilities into fire compartments
(e.g. production, storage, packaging)
Construct buildings using non-flammable
materials
Fire Prevention Steps
Risk Management
Test business continuity plans, including alternative production locations
Install fire extinguishing
systems in hazardous facilities
Monitor the facility with an automatic
fire alarm linked to the fire department
Equip the facility with an automatic sprinkler system
What are the implications
for insurers?
Equipment cannot be cleaned or repaired, in part due to regulatory requirements.
Due to the just-in-time nature of the food industry’s supply chain,
small losses cause BIs that are longer than anticipated.
No possibility to outsource. Production is halted while rebuilding takes place.
Production alternatives are restricted, especially for businesses that require on-site production, mineral water, for example, and regional specialties such as Koelsch, Champagne, Nuernberger Rostbratwuerstchen, etc.
What insurers need to
keep in mind :
As facilities become more industrialized, and involve higher values, insurers should regard these risks as industrial, rather than commercial.
Industry and underwriting knowledge are essential and should include regular site visits by insurers’ risk engineers.
Careful examination of wordings/special policies, as well as adjusted sub limits and total policy limits, are also critical.
To learn more, contact
your Gen Re
Account Executive.
© 2016 General Re Corporation | This presentation is intended to provide background information for our clients and professional staff. It is time sensitive and may need to be revised and updated periodically.
+49 221 9738 939
Leo Ronken