Spotlight: Food, Agribusiness and Beverage Global Market and Claims Overview
Global Market Overview
- Overall, market conditions have stabilized throughout 2022. Insurers have continued to demonstrate more flexibility, including in areas where they had recently imposed restrictions.
- While insurer profitability has been positively impacted by previous price increases and active insurer management of retentions and limits deployed, further price adjustments - although less severe - continued in Q2.
- Key underwriting themes included: financial performance, balance sheet health, continued COVID impacts, supply chain, inflation, stock performance, M&A activity, ESG, and exposure related to events in Ukraine, Russia, and Belarus.
Specific areas of underwriting concern were:
- Cyber renewals, in the face of increasing ransomware attacks in the FAB industry. Conditions continued to be very challenging, with insurers seeking double digit price increases and higher retentions. Underwriting was rigorous, with extensive information related to insureds’ Operating Technology (OT) environment required.
- Risks with US exposures including Product, Excess Auto and Employers’ Liability, due to heightened underwriter caution stemming from the litigious environment in the United States.
- Risks arising from macro-economic volatility and the increased severity of derivative claim settlements. Underwriters are closely monitoring potential impacts from these conditions.
- Stock Throughput renewals, following recent large whiskey/bourbon losses. Insurers have become more conservative, especially related to fire risk at aging storage locations. Proactive risk management is key to achieving superior outcomes.
- Extended coverages on Liability programs such as Pure Financial Loss, Product Recall and Professional Indemnity. Insurer conservatism remained high as insurers looked to limit their exposure to claims from these extensions.
- New market entrants have provided reason for optimism in 2022, although most have focused on mid/high-excess attachments. Broad coverage remained available yet alternative structures (e.g., higher retentions, coinsurance, quota shares, and alternative capital such as captives) continued to be useful levers when needed.
- Over $1 billion in theoretical D&O capacity was available in Q2, although practical capacity for most programs was well below that amount. More competition has helped to moderate pricing in this space.
- Excess capacity for recall/contamination remained competitively priced despite recent well-publicized large losses.
Claims / Risk Control / Engineering
- Loss trends for Marine Cargo include vessel fires, mis-declared cargo, supply chain deterioration/spoilage, temperature exclusions and warehouse fires.
- Insurers utilized their risk engineers more regularly to review specific product exposures such as infant nutrition, CBD (cannabidol), Diacetyl and where appropriate, PFAS (per- and poly-fluoroalkylated substances). Detailed underwriting information was required for any risk with these exposures.
- As a result of high loss frequency and severity stemming from fire/explosion across the industry insurers have become more stringent in their risk control requirements.
- Inflationary pressures have driven up claims costs. It is critically important to review valuations and increase policy values where applicable. Deductible options can be considered to help offset any related premium increases.
- Increased vigilance is required in the face of constrained global commodity stocks and the potential for economically motivated adulteration, which could in turn lead to recalls/product liability claims.