The building and property insurance costs for the food and beverage production industry in Australia continue to rise, especially for those with hard-to-place risks like Expanded Polystyrene Insulation (EPS) panelling.
Insurance brokerage and risk management giant Gallagher has released a report that outlines strategic considerations that could help food producers meet their business property and operational insurance needs.
The report explains how food producers can meet increased risk management requirements, implement additional risk mitigation processed, negotiate reduced market capacity, and better manage the total cost of risk of premiums, deductibles, and self-insured retentions.
One of the risks that food producers using EPS panels need to address is fire risk, as EPS has been associated with multi-million dollar claims involving Australian food production facilities in recent years, causing insurers to hesitate in providing property insurance.
“The largest area of concern for insurers is the protection of the EPS insulation and how businesses are mitigating potential fire loss in relation to any type of ‘hot work’,” Gallagher said.
Gallagher emphasised that presenting a business's risk in optimal terms for insurance renewals requires a planned and strategic approach, supported by detailed risk planning submissions and corporate governance information. Therefore, businesses must prepare their insurance submission four to six months in advance.
“Insurers are looking for pragmatic, detailed information and in some cases investment in changes to risk management as part of a business risk submission that supports insurers' appetite for providing capacity on the insurance program,” Gallagher said.
Gallagher advises food producers to partner with brokers, insurers and qualified risk management professionals with food and beverage production experience, who will conduct an independent audit of the facility and make recommendations.
“A valuable component of a comprehensive risk management plan is engaging an independent audit of the property, including recommended rectification and mitigation of identified risks where required,” Gallagher said.
“Your internal budgetary planning, including risk management costs, capex improvements, and increases in premiums, should be reviewed, discussed, and modelled where applicable. Adjusting self-insured retention may be a viable option for some food producers if they are in a position to take on higher excesses against losses. This strategy is best suited to companies with a balance sheet that can support these increases, and this is where it is vital to get advice from an experienced food & beverage broker.”
