Forces for change in the Food & Agri Industry

22 July 2014

The food and agri sector is big business. Currently the prospects for future growth are strong, spurred by growing populations and favourable legal changes. But the pressure is on to innovate and pre-emptively manage risks to take advantage of this growth.

To highlight the need for innovation I’ve taken three areas where change is happening fast and businesses needs to work closely with their insurance brokers: 

M&A activity finally picked up at the end of 2013 and the trend seems likely to continue with corporates and private equity firms eager to invest in the sector. However, to sustain this confidence, businesses need to ensure that risk management is brought centre stage. 

Buyers should make it a priority to review the adequacy of a target’s insurance programme to identify gaps in cover and uninsured risks. In identifying risks that are not adequately transferred they will avoid unanticipated costs post-completion and at the same time strengthen their negotiating hand. All too often insurance costs are dwarfed by failure to highlight pre-completion the capital expenditure needed to upgrade buildings or equipment to ensure continuation of cover. 

Sellers, on the other hand, need to prove adequate cover to head off issues in the due-diligence phase and prevent any unwelcome renegotiation surprises or delays to the timetable.

Feeding a growing population presents a tremendous opportunity for food manufacturers and agri businesses, but it also increases risks and puts pressure on companies to innovate to increase productivity. Changing processes, longer supply chains and new product development often collectively increase risk in areas such as product contamination and recall. The solution to the challenge lies in innovation within the insurance world (where new products are being developed rapidly) and closer working relationships with brokers as well as specialist companies with skills in food analysis and testing. 

Health and safety performance in the sector has improved significantly in the past two decades although there is a strong focus on behaviour and culture to improve things further and we are working with our clients to achieve this. 

We have also been taking a close look at the complex Ministry of Justice reforms to civil litigation funding. Whilst the reforms should effectively curtail no-win, no-fee cases, there is a new pressure on defendants to comply with the new guidelines. Speed is of the essence in responding to claims; otherwise a claimant’s legal fees will still be allowed to mount up. 

Our advice is that there is an even greater imperative to implement systems to properly investigate and record accidents. Once there is a cultural understanding across the company that you take such incidents seriously, you are unlikely to experience frivolous claims in the future and hopefully will avoid court altogether. 

For further information, please contact Jon Miller, Head of Regional Food & Agri Practice on +44 (0)12 1626 7806