There has been an emerging picture for some time now of a generally much tighter insurance market with insurers looking for higher premiums and insurers taken a particularly aggressive stance over premises built with insulated panels such as polystyrene and polyurethane.  We have had reports from members of companies being refused renewal of cover altogether or being asked for premiums out of all proportion to their previous costs.

The situation is particularly complex as insurers and underwriters are often making blanket decisions because of the existence of such insulated panels, irrespective of the proportionate fire risks related to the activities within those buildings.  It naturally follows that most food premises, whether producers, wholesalers or cold stores are now the subject of intense scrutiny from insurers.

It is clear that many insurers are simply not looking closely enough at the risks involved in the particular processes and it naturally follows that a production company with deep fat frying presents a greater risk to insurers than a wholesaler who is merely intaking storing and dispatching goods.  However, the presence of any panels other than Rockwool are providing immense problems for BFFF members and even those progressive companies thinking of building new premises over the next few months are in a dilemma as to what materials to use.  Rockwool is not an ideal material for panels in the food industry and it has many disadvantages beyond those of increased cost.  Its use in cold stores is particularly difficult due to the climatic conditions and it is by no means ideal even though it is more fire proof than the alternatives.

Your Federation has taken advice from brokers who are associate members of BFFF, we are also in communication with the Association of British Insurers and Ian Farley, Coleridge Marchment and myself attended a talk given by a senior figure in the Association of British Insurers who is on the technical side of Royal and Sun Alliance.  The presentation actually presented a very inconclusive picture with regard to options for the future but it did lay out some potential parameters by which operators in our industry could seek to attain levels of fire prevention and fire resistance which would satisfy insurers and underwriters to at least obtain cover. 

The question of cost then comes into the picture and we believe it is necessary for us to convince the British Association of Insurers that each and every business in the food industry does present a singular risk for insurers, not only with regard to building and fire insurers but also from the coverage of business interruption insurance which is also frightening the insurers to death.

In the light of this situation, Lloyds Brokers and suitably qualified surveyors made a presentation to the Joint Meeting of our Producer/Importer/Broker and our Wholesale/Retail Committees on 28th February 2002 and we have now provided further information to our members.

We are also initiating more dialogue between ourselves and the Association of British Insurers as the whole basis of the calculation of premiums does not seem to be logically based on a risk assessment basis and indicates insurers taking an ultra defensive view most certainly in the shorter term.

We believe that our industry will have to pay more in premiums for insurance in the future, in a technically very tight insurance market where many underwriters are walking away from certain areas of risk altogether.

This new area of concern is just one of a whole string of new burdens being placed on producers and wholesalers and although the retailers and large catering end users are demanding a “no inflation” regime, the culmination of pressing issues such as the Climate Change Levy, increased packaging costs, factory gate pricing and now the issue of insurance means that the reality is inevitable price rises in the value change.

With the best will in the world, absorption of the costs cannot be isolated into particular sectors of the value chain and it is crucial that the Federation provides the platform for closely integrated discussions between producers, wholesalers, retailers and catering end users so that our unique format of membership can ensure that the whole value chain remains profitable, showing returns on capital at levels that innovation, the very lifeblood of the frozen food industry, can be continued.

We will keep members posted of the developments in the insurance areas but please do ring Alf Carr or Ian Farley as one of the best pieces of advice from the lecturer at the meeting we attended was – “Don’t wait until a couple of weeks before your premium is due before you start talking in depth to insurers”. 

Contact:  Ian Farley Tel: 01476 515304