Product Recall
Competition expands insurers’ risk appetite
Insurers have broadened their risk appetite as a result of the competitive market. Insurers with more established books of business are looking to diversify their portfolios away from the standard product recall buying industries.
Changes in policy terms and conditions
Insurers have been offering cover for mould & pest infestation and product refusal more often to food and beverage clients. Typically, this cover has been heavily sub-limited but as insurers compete for market share the level of protection we are able to obtain has increased.
Underwriting changes
HCC has set up a London operation and hired a team from AXA XL. The HCC capacity is a welcome addition to the market and the expertise the team brings will support us in providing solutions to clients in a range of industries.
Notable claims
Driven largely by the food and drink sector, the frequency in which severe losses have impacted the market has increased notably over the past 18 months. Insurers have started to require insureds to demonstrate that coverage has been triggered and are looking more forensically into the substantiation of costs associated with claims. Losses from 2023 have had a considerable impact on a relatively small pool of insurers. Consequently, reinsurers may start scrutinising insurers on their risk management practices. Furthermore, reinsurers may require newer market entrants to limit their capacity on larger market placements to ensure they are not being overexposed.
Geographic/sector differences
We are receiving more enquiries for standalone Product Recall cover from continental Europe, as poor loss experience over a number of years has, in some instances, caused the local market to exclude Product Recall cover under General Liability policies. The opportunity for Product Recall insurers to diversify their portfolios into continental Europe has been enhanced by a greater comfort around the intent of local wordings and the ability to provide ‘follow form’ cover as excess capacity on local placements. Furthermore, exposures domiciled in continental Europe can obtain clearly defined policy language and broader first party coverage by coming to the London Market on a standalone basis.
New solutions
Lockton’s Product Recall team has recently launched a Global small and medium-sized enterprise (SME) product targeting food and beverage companies with revenue of >USD 100m (or currency equivalent). The facility has proved successful in bridging a common price challenge ‘new buyers’ with limited insurance budget have been facing.
Lockton have also recently launched a new product called ‘SupplySure’ which has been established in conjunction with the Lockton Cargo team. This provides clients with valuable protection of their manufacturing, storage and transportation risks, truly providing a ‘farm to fork’ solution for food & beverage companies.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
Due to the abundance of capacity rates are set to remain stable. By re-marketing accounts we are often achieving savings for clients.
Expected capacity change in the next 6 months for claims-free portfolios
Insurance capacity in the London Market is abundant and although there have been a few larger losses recently we don’t expect any material changes.
Expected coverage change in the next 6 months for claims-free portfolios
While we may see an increase in sub-limited cover, we don’t expect any major changes to coverage.
We advise clients to invest in building long term partnerships with insurers as this will usually help insulating them against potential market fluctuations.
Emerging risks
Electric vehicles (EV), specifically lithium-ion batteries continue to be a difficult product to insure. Due to insurers’ limited appetite for such risks following severe loss activity, premium and retentions often make the risk transfer proposition unattractive for clients in this space. As more research is published and insurers gain a better understanding of the true risk exposure these batteries create, we expect more insurers to be able to deploy capacity to EV risks.
Renewal recommendations
We advise clients to invest in building long term partnerships with insurers as this will usually help insulating them against potential market fluctuations. Building stronger relationships will also allow insurers to develop a better understanding of the clients’ business which will be helpful in case of a claim.
For further information, please visit the Lockton Specialty page, or contact:
Freddie Statham
Broker Product Recall
E. freddie.statham@lockton.com
Freddie Schlesinger
Head of Product Recall & Reputational Risk
E. freddie.schlesinger@lockton.com