The food and drink industry – insight to the state of the market
Looking to unlock value at your next insurance review?
Paul Williams, Development Director, explores the insurance challenges facing businesses in the food and drink industry and highlights insight into what businesses can do to secure a better result from their next insurance review.
The food and drink industry – insight to the state of the market
According to the Food and Drink Federation 2023, the food and drink industry is the UK’s largest manufacturing sector, and part of a diverse and complex supply chain. It accounted for 20% of total manufacturing output and generated £30 billion in gross value added and £112 billion in sales in 2021*.
The recent past
Buyers of insurance within the food and drink industry will recognise that the sector was hit hard in 2020 by the hardening of the insurance market. Whilst some property insurers exited the food sector completely, others reduced the amount of capital they were willing to risk. Insurance premiums skyrocketed, as did deductibles, and stringent terms and conditions were imposed on many businesses. In our experience with some property insurers, organisations with a challenging risk profile and / or those who could not evidence strong risk management struggled most.
Insurance buyers, accustomed to insuring 100% of their values at risk, were forced to accept a loss limit as insurers would not insure to the full value, which left them vulnerable to a total loss. Similarly, several businesses who traditionally were insured by a single insurer for property began to see their risk being divided between as many as 10 insurers, some of whom insisted on charging higher premium rates than the lead insurers.
Current market conditions
We have witnessed a slowing in the rate of premium increase, but many insurers are still attempting to push double-digit increases at a time when the value of buildings, machinery, and stock are suffering their own inflationary pressures. Capacity, that is the number of insurers in the market willing to insure food manufacturing property, is still a challenge and has not increased noticeably.
Insurers expect a robust risk management plan and diversified approach as a minimum, with great attention to fire prevention and suppression.
How to unlock value in the market?
- Engage your senior leadership team, i.e. technical, operations, finance, health, and safety and HR to understand and build a detailed picture of how you manage risk
- Identify and understand your competition, benchmark yourselves and highlight gaps for improvement
- Utilise management information (MI) to develop and build a new positive perception of your business to the insurance market
- Consider the ‘people risk’ in detail as the Food and Drink industry’s key asset is people, explore what training and development may be required
Late 2023 and beyond
We expect the market will stabilise and there will be opportunities for businesses who have invested in risk improvement to enjoy a more stable rating environment moving forward.
What will determine whether your business will be able to access these opportunities will depend on how the insurance market views you as a business, which is a function of how your insurance adviser has portrayed you and your risk profile to insurers in 2023.
Talk to us
Our team of experts understand the risks you face, from the property insurance to issues of labour costs, inflationary pressures and supply chain challenges. Our team will aim to work with you to understand your needs and requirements, tailoring an insurance and risk management solution to protect your business. Get a quote or request a free insurance health check.
Sources:
*https://www.fdf.org.uk/fdf/business-insights-and-economics/facts-and-stats/