Even the factory who strictly follows food safety standards can fall victim to product contamination. Insurance as a financial loss recovery risk management tool is therefore relevant for any meat processor. If the risk is analysed and presented properly by a broker to underwriters, suitable coverage and a fair insurance price can be achieved.
Regardless of the category, ensuring food safety is considered one of the biggest challenges of the twenty-first century and features prominently on the agendas of most countries. According to regulations, food is considered unsafe if it is likely to be harmful to health or unfit for human consumption. Whether it is a defective ingredient, a mistake in production, or improper transport or retail handling, the cause of a product defect can be multifaceted, and as soon as a business has even the slightest reason to believe that their product does not comply with food safety requirements, they are obliged to immediately withdraw it from the market. From producer to processor to importer and trader, this provision applies to the entire supply chain. Are you ready if your business falls victim to food contamination?
Statistics are worth a thousand words
Figures show that between January 2020 and the 1 March 2024, 2,371 food safety incidents were registered in EU countries. That’s, on average, 575 cases per year, or the equivalent of almost two incidents per day! Within this, according to RASFF, meat and meat products were the third most frequently reported category (13%) to have food safety issues in the food industry. During the last four years, countries across CESEE, from Poland to the Netherlands, Belgium and France to Italy, CESEE reported multiple cases of salmonella, listeria, and escherichia coli shigatoxin as issues they were facing, as well as unauthorised substances or an excess of substances, foreign bodies inside the meat, and traceability concerns.
Why the meat processing industry is so exposed to injury claims, contamination and recalls
The meat industry represents a long food supply chain. It starts with the production of crops to feed livestock, and goes on to include further breeding, slaughter, processing (either in its natural state or as an ingredient in another product such as pizza toppings, beef patties or ready meals), transportation, storage, and finally, delivery to the end consumer. During any of these stages errors and failure to comply with food safety standards can occur leading to product contamination and an array of negative financial and reputational consequences.
Product recalls can be organisationally and financially challenging for a business, and even more so for those who operate outside their local market. In this regard, the meat industry is potentially where some of the biggest problems lie: It heads the list of foods most frequently associated with safety hazards and human illness, and when meat products are enroute to another part of the world and a contamination problem arises, organisations need valued and trusted support to handle the situation quickly and effectively.
A recent case study of a German company with a turnover of 100 million EUR serves as a good example. Listeria was found in some of the company’s meat products. They had to bear recall expenses from US and UK markets and additionally lost gross profit. Once all recalls had been done, all contaminated products destroyed and the source of the problem identified and rectified, the company suffered total losses of 90 million EUR.
Meat manufacturers held accountable no matter where the fault occurs
When disaster happens, meat processors will typically be held legally liable along with their meat suppliers or carriers, even if the cause of meat contamination does not occur at their meat processing premises. From unidentified additives, hidden allergens, and the use of nitrates, to the mislabelling of products (unintentionally or intentionally), fraudulent activity by suppliers and malicious adulteration of a products by a disgruntled employee, the possibility of a food safety issue resulting in a costly, reputationally damaging lawsuit are high and meat products processors will bear the brunt of the exposure. What is more, if a meat product processor imports their meat from foreign countries, customers will be more likely to bring claims against the manufacturer because lawsuits against foreign meat packing plants and suppliers may be difficult to pursue.
No matter what the cause, it is essential for meat processors to have the right kind of insurance provisions in place because a food safety incident can result in numerous additional expenses. All the possible losses resulted by product contamination can be categorised in the following way:
When all else fails, insurance prevails
As we have seen, even the factory who strictly follows food safety standards can fall victim to product contamination. Insurance as a financial loss recovery risk management tool is therefore relevant for any meat processor. If the risk is analysed and presented properly by a broker to underwriters, suitable coverage and a fair insurance price can be achieved.
As a rule, there are three types of insurance offers in CEE/SEE insurance markets: Product liability insurance, product recall extension to a product liability policy, and contaminated product insurance. A comprehensive package of all three can cover a company for all the above-mentioned risks and more. However, due to a plethora of offers on the market, it is sometimes very difficult not only for the insureds, but also for insurance professionals to clearly define what is covered and what is not. Moreover, there are some challenges to find underwriters with risk appetites to cover “hard” risks, for example, products containing GMO or carcinogens. Therefore, it’s important for businesses to carefully review their insurance policies and consult closely with insurance professionals to ensure they have adequate coverage tailored to their specific needs and risks.
Maksym Shylov
Group Practice Leader
Food & Agriculture
T +48 22 39 33 211
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