Food & beverage insureds have environment, reputation coverage gaps
Manufacturers’ risks and coverages show a lack of alignment around their biggest threats, according to WTW.
Although food and beverage manufacturers have policies in place to cover their main risks, many lack specific coverages to address the risks rated as the biggest threats to success, according to a survey of sector executives by Willis Towers Watson (WTW).
Environmental risks ranked as the biggest external threat to food and beverage companies, with 40% of global respondents and 51% of U.S. respondents seeing it as the greatest threat to success. Further, 79% of U.S. food and beverage manufacturers cited concern over natural resources as the top environmental risk. However, 68% of respondents said they had no specific coverage for environmental risks, but thought it might be covered by another policy.
“The food and beverage sector is natural resource and energy intensive, due to its high dependence on animals, crops, water and refrigeration,” Christopher Strong, head of environment for WTW, said in a report. “These dependencies mean businesses are both at risk of negatively impacting the environment, and vulnerable to those impacts, from climate-related weather to depletion of natural resources.”
Strong explained environmental risks can often “fall between the cracks” of general and public liability policies, making it critical to review the coverage currently in place and address any gaps that are uncovered.
“The global focus on the environment is not going away. Taking action now may save you trouble down the road,” Strong said.
Reputational threats
A similar posture toward coverage is also seen for reputational and brand risks, which ranked as the biggest internal risks, according to WTW, which noted that 81% of respondents said reputation is critical to their ability to make money. Yet, just 45% of food and beverage manufacturers surveyed had specific coverage in place to address these threats.
Product recalls also ranked highly as an internal risk, but 42% of respondents don’t have a specific policy in place to respond to a recall. This comes on the heels of recent reports that the number of units impacted per recall event hit a 10-year high in 2022’s first quarter.
WTW reported many could be relying on public liability policies to cover recall events. However, these types of policies lack crisis management and brand rehabilitation support.
Additionally, if a recall does occur the damages go beyond lost revenue as retailers also tack on fees for the inconvenience of empty shelves, according to WTW, which noted these fees are included in product contamination policies.
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