In this changing marketplace, preparation and a detailed knowledge of your company's risk profile could make all the difference.
The product recall insurance market has seen double-digit rate decreases in recent years.
The potential cost and reputational damage of a product recall – as shown by some high-profile cases – led to many companies buying the product for the first time. Global annual recall premiums have risen steadily as a result, with some estimates putting it at more than $400m. In this highly competitive marketplace policyholders have managed to secure broader coverage.
However, the market has recently seen two significant events:
1. The departure from the US and UK market of Liberty – a major market force, especially in the non-food/packaging sector.
2. Reports of a significant loss event to the market in the region of $60m on a policy for Mars, after it recalled confectionary because of Salmonella worries. Such a loss could represent 10-15% of total market capacity. Most recall markets use reinsurance to protect against severity losses but, with reinsurance costs likely to increase in 2018, these costs could well filter through to insurance buyers.
For product recall insurance buyers, preparation is a critical factor of success.
Mindful of the rise in frequency and claim size, insurers are capping primary limits and using quota share reinsurance to limit their exposure. In future, they will need to scrutinise the risk they are writing more closely.
For product recall insurance buyers, preparation is a critical factor of success. During times of changing insurance market conditions, companies need to engage with the market as early as possible.
To get the most suitable product recall insurance in this changing marketplace, companies should take the following steps:
1) Canvass the market to ensure you know all your options. While some insurers have left parts of the market or reduced their participation, others have expanded their product recall business. The London market can move swiftly in terms of new capital, so shopping around is vital.
2) Provide insurers with accurate, detailed submissions. With insurers potentially being more selective with which companies they insure, and for how much, it’s even vital to sell your risk.
3) Go to market in a timely fashion. Don’t wait until three weeks before renewals.
4) Know what you’re willing to compromise on. Know what protection you absolutely need compared with the coverage your company would like to have, but can do without. This comes back to really knowing your risk profile and culture.
5) Work closely with your insurance broker. The more we know about your company – the more we can fight for and protect what’s really important to you.