Market conditions for product recall insurance buyers are changing due to uncertainty around pandemic-related claims as well as a general push for profitability by some insurers.
The pharmaceutical sector is facing a product recall wave suggesting that there is a supply chain risk the industry needs to address, not least because the insurance market is finding the exposure difficult to underwrite.
The product recall market saw a significant amount of renewals and new business coming into Lockton London for 1/1 and this has provided a good gauge on the state of this niche market which we would like to share with current and prospective clients.
Product recalls can become quite expensive, and smaller businesses may struggle more than larger ones to absorb the cost.
Like many niche sectors, the product recall/brand damage market is nervously evaluating how it will be affected by the significant premium increases in parts of the property & casualty (P&C) insurance sector. Whilst we are seeing some rate increases in the short term, there are strong positive trends in the medium/longer term as insurers realise the comparatively strong growth potential and profitability of the recall/brand damage insurance market.
Corporates have become increasingly vocal about their concern that the insurance industry is failing to respond to the exposure of its client base to reputational harm and brand damage. Instead, large brands are transferring the risk down the value chain, with parts and ingredients suppliers taking up the protection required to reduce the risk of the brand owner.
Product recalls are set to increase off the back of new guidelines by the UK’s Food Standards Agency (FSA) specifying the processes to trace and remove unsafe food items from the market.