The food and agri sector is fast, dynamic and multi-faceted. It is continually responding to changing market conditions and evolving customer demands, while proactively looking to improve the products and services it provides.
As brokers and insurers in this market, we need to take a lead from our clients and make sure we continue to drive innovations in the risk management and insurance solutions we offer.
Insurers have a growing appetite to write business in the food and agri sector, as demonstrated by the current excess of capacity when compared to the available risks. Nor are there any signs that insurer appetite or capacity will diminish in the next six to 12 months, and so rates are likely to remain soft.
However, some of the underlying fundamentals in the market are shifting. For example, five years ago the big losses tended to be on property, such as fires at large commercial sites with composite panelling. Whilst losses do still occur, increased focus on risk engineering has reduced the frequency and severity of these losses. We are now seeing losses arising from other risk areas, such as contractual disputes and product recall situations. Today, there is a major focus on the supply chain and each link has to comply with tougher legislation and tighter regulation.
Commercial businesses are also more savvy about managing their supply chain and enforcing their rights and recovering their losses – through legal proceedings if necessary. Many supply chain losses remain out with the scope of mainstream insurance policies and this is something we need to work on as a market. This can be achieved through risk transfer and more innovative use of self insurance, which can help to build a claims profile for previously uninsured risks.
In the aquaculture market we are creating a central knowledge hub to establish a single repository of information that we hope will help inform insurers looking to expand their footprint in this sector and develop new products.
The insurance market takes a lot of comfort from the three or four hundred years of understanding it has built up around fire and marine risks. However, it is yet to develop a detailed understanding of the scope and scale of many emerging risks – such as cyber, product recall – and this can make underwriters nervous and dampen the desire to be innovative.
As a market, brokers, insurers and clients must work together to promote innovation. We must not fall into the trap of trying to rehash yesterday’s solutions to fix tomorrow’s problems. Instead we must use our existing learning to come up with new and more effective ways to deal with the challenges ahead.
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For further information, please contact Trevor Young, Partner on +44 (0)20 7459 5550