A QUICK GUIDE TO FOOD & BEVERAGE INSIGHT FOR A CLEARER UNDERSTANDING OF CORPORATE RISK THE VALUE OF FOOD & BEVERAGE insight
Industry Insight Key RISKS The Food & Beverage industry is a growing part of the UK economy. Defined as Food & Beverage manufacturers, caterers, wholesalers and retailers the 70 billion industry employs over half a million people. Zurich, as an established provider of risk and insurance services to the Food & Beverage industry understands the challenges your customers face. That is why we have focused our expertise to create a Food & Beverage proposition that meets the needs of the industry lots of food for thought when talking to customers. The key risks in Food & Beverage FIRE DAMAGE The use of heat in processing Food & Beverage ingredients and the storage of potentially hazardous materials can be compounded by the construction of the premises, often including combustible composite panels which can promote rapid fire spread. Good standards of fire protection, housekeeping and management, maintenance and protection against criminal activity are key mitigators of these risks. BRAND REPUTATION The value of a brand and its industry reputation is an essential part of any business. Lack of management or mismanagement of brand following a major incident can severely damage customers directly through additional loss of revenue, customer or supplier confidence and ultimately the value and viability of a company. PRODUCT RECALL As a result of increasingly complicated product safety challenges, manufacturers, wholesalers, distributors and retailers are more frequently turning to product recall insurance in order to protect their brand and balance sheet. SUPPLY CHAIN How well do your customers know their supply chain? We understand how critical a supply chain is to a Food & Beverage business, and how disruptive interruptions can be if a supplier cannot deliver. In Food & Beverage, the challenges of managing an increasingly complex network of suppliers can threaten business resilience. REGULATION/ LEGISLATION CHANGE The Food & Beverage industry is subject to onerous legislation, from labelling and packaging to food safety requirements. Keeping abreast of the changes can be a real risk for your customers and reflecting the legislation within all working practices and contracts can be a challenge. HEALTH & SAFETY There are a number of health and safety pressures in the Food & Beverage industry. These can range from the risks in preparing food, to the use of machinery and plant. This creates health and safety risks, which need to be carefully managed. BUSINESS CONTINUITY MANAGEMENT Without an effective Business Continuity Plan, the majority of businesses fail following a major incident. The ability to sustain business as usual following a crisis or incident is a key consideration in any risk management strategy. MACHINERY BREAKDOWN & STOCK DETERIORATION Many Food & Beverage companies rely on plant and machinery as a key part of their operational infrastructure. Whether it is the reliance on refrigeration units to store food stuffs or a piece of production equipment, the breakdown of either could have a detrimental effect on the business. ENVIRONMENTAL The importance of green issues, legislation on environmental clean up and demands around carbon reduction and pollution are all increasing.
Insurance Insight cover and VALUE TRADE SPECIFIC COVER EXTENSIONS Automatically included as standard Property Trace & Access 25,000 Limit Exhibitions 10,000 Limit Adaptation Clause 1 the Adaptation Clause that Zurich offers provides cover over and above the additional costs of complying with European Community or UK building regulations, by allowing the policy holder to conform to Energy Performance Certificate assessments and use sustainable materials in the reinstatement of the property Brand Protection Automatically included where Property and/or Casualty are purchased. This helps your customers to manage their reputation following a major loss in excess of 1 million under the Property and/or Casualty covers 50,000 Limit. Risk Management Advice Line Free, practical advice on risk management topics such as property, security, business continuity, environmental, food hygiene and health and safety, to help you proactively identify and manage issues before they occur. Business Interruption Unspecified Customers 50,000 Limit Unspecified Suppliers 50,000 Limit Public Utilities (with 24 hour access) 100,000 Limit Denial of Access 50,000 Limit Notifiable Diseases 50,000 Limit Fines & Penalties 50,000 Limit Essential Personnel 20,000 Limit Product Liability First Party Product Recall 100,000 Limit Disaster Recovery Our disaster recovery suppliers get companies back up and running quickly after an insured loss by finding alternative office space and setting up phone and internet connections to local networks as quickly as possible. Risk Insight Wider risk-related expertise Value Added Services By passing on value across the risk spectrum, we can give you and your Food & Beverage customers a broader understanding of their risk profiles. Some services are in-house, some are provided by our partners who are leaders in their fields. All of them give you added insight to help you win and safeguard customers. Zurich services: Risk Engineering Supply Chain Business Continuity Management Mergers & Acquisitions Multinational Insurance Proposition Wider risk related services: Legal Experts Environmental Consultants Loss Adjusters
KEY TRADES ACCEPTABILITY CRITERIA WELL MANAGED HAZARDS Good examples of inception hazards that are well managed: Regular cleaning and maintenance of cooking / frying / extraction / venting equipment Light fittings, including fluorescent tubes are kept well clear of stock Free standing heaters are sited clear of combustibles and are adequately guarded External storage arrangements minimise fire inception risks Top of storage racks are kept clear of overhead heaters Smoking is effectively controlled Suitable precautions are in place with regard to shrink-wrap operations There are suitable storage arrangements outside Electrical installations are modern, in good condition, well maintained, regularly tested and inspected Portable appliance testing should be undertaken Hot Work is adequately controlled Adequate and tested sprinkler system in preference to water mist fire suppression systems SPREAD AND DEVELOPMENT HAZARD Features that mitigate loss: Automatic fire suppression systems in all cooking areas Suitable storage arrangements (including hazardous materials), fire doors and shutters in good working order and free from obstruction. Fire development and spread may vary depending on the type of storage arrangement, block sizes, aisle width, storage height etc. High pile storage may make fire fighting operations more difficult, depending on the nature of goods stored and extent / types of packaging materials. Separation and containment of hazardous articles and aerosols Excellent and controlled waste removal arrangements and processes Regular maintenance of all fire fighting appliances The presence of combustible panels and linings such as fibreboard, expanded polystyrene (EPS), polyurethane (PUR), and non-approved polyisocyanurate (PIR) are adverse features and need to be identified for specific consideration. If combustible composite panels are a feature of the presented risk then the panels should not be situated in the cooking areas, no electrical or other equipment should pass through them without adequate sleeving and sealing Glass fibre, foamed glass, mineral wool and LPCB approved composite panels are preferred, where composite panels are part of the risk The building should be compartmented, ideally through fire break walls
KEY TRADES WE RE FOCUSING ON We ve focused on specific groups of Food & Beverage trades where we want to grow our presence. Zurich will treat all risks on their own merit. 1 PRODUCERS AND PRESERVERS OF MEAT & POULTRY Manufacture and processing of bacon, ham, poultry and other meat (but not slaughtering) UK firms 162* 3 FRUIT & VEGETABLES PROCESSING AND PRESERVING Manufacture of chilled/frozen food and drinks and ready meals Preparation of fresh and chilled salad products Pre-packing of vegetable and salad crops for sale to retail outlets UK firms 102* 2 FISH PROCESSING PRESERVING AND PRODUCTS Processing, packing and supply of fish and seafood Wholesaling of fish including shellfish and molluscs UK firms 48* 4 OPERATIONS OF DAIRIES, ICE CREAM & CHEESE MAKING Manufacture and supply of cheese, butter and dairy related products for the retail and food service markets UK firms 108*
5 MANUFACTURE OF BREAD, PASTRY, CAKES, BISCUITS & RUSKS Manufacture and sale of biscuits Manufacture of bread and confectionery products Manufacture and sale of flour confectionery, hot and cold desserts and other food products Baking of frozen foodstuffs 6 MANUFACTURE OF COCOA, CHOCOLATE & SUGAR CONFECTIONERY Manufacture and sale of chocolate products and confectionery UK firms 48* UK firms 133* 7 BEVERAGES Processing and distribution of fruit and fruit juice drinks Manufacture and sale of soft drinks Brewing, bottling, canning and processing of beers Production, distribution and sale of alcoholic spirits Production of malted barley and the distillation of malt and grain whisky and neutral spirit UK firms 156* 8 CATERING Provision of contract catering services including catering and vending equipment UK firms 1126* * approximately 9 WHOLESALE OF FOOD & BEVERAGE Wholesaling of fruit and vegetables, dairy, meats, fish and beverages Wholesaling of other foodstuffs including sugar, tea, coffee and deli products Wholesaling of packaged and frozen foods UK firms 1718*
KEY TRADES ACCEPTABILITY CRITERIA KEY RISK FEATURES Acceptable features. What should an insurer be looking for? Hazard areas (e.g. heating processes), such as deep fat frying or ovens to be fully enclosed within fire resisting panelling Plant rooms and other significant inception hazards to be enclosed or separated from production areas by a good level of fire resistance All panels to be replaced at least when maintenance dictates and with an expectation to see any hazard areas suitably segregated Deep fat fryers and other hazardous plant such as travelling band ovens to be protected with automatic fire protection, such as water mist, CO2, Ansul system (this is a specialised system, approved by the LPCB for kitchen ranges) Acceptable external storage to mitigate the risk of arson Hot Work Permit system in operation for own and contract staff Electrical Installation to be well maintained, modern, with inspection and test procedures in place to equate to IEE Requirements Effective separation and/or compartmentation of high inception risks a high inception risk coupled with combustible building construction can make a risk unacceptable Good management and awareness of fire inception hazards. For example robust procedures and controls around the handling of goods and a regular maintenance programme of all equipment Method of Storage should comprise non-combustible racking up to 4m Sprinkler Design pressure, flow, distribution of heads, in rack sprinklers in accordance with LPC rules or BSEN12845 standards and adequate water supplies, pressure and flow A sprinkler system would always be preferred when there is a combination of some or all of the following features: - Combustible construction - Hazardous processes - Storage of combustible goods - Use and storage of flammable materials such as cleaning fluids, inks (involved in the printing of packaging) - Large undivided fire areas in excess of 4000 square metres in the case of manufacturing risks BUSINESS INTERRUPTION An acceptable material damage risk feature may sometimes be a less positive feature when considering the business interruption aspect of a risk: Some risks to be aware of in a business interruption context: Hygiene issues mean that a relatively small fire can lead to a large business interruption loss due to the clean up costs and resultant downtime. Non-thermal damage is also an issue in respect of the contamination of foodstuffs. Clean up costs can add further to the loss. 24/7 working is an advantage in some areas, but often means there is no spare capacity to increase production in order to aid recovery after a loss. Customers/Suppliers extensions can be particularly heavy business interruption risks. The contracts that the Food & Beverage supply industry enter into could have punitive contract terms or show lack of loyalty. Supermarkets may, for instance replace stock with competitors goods if a Food & Beverage company cannot fulfil the contract. This could result in a permanent loss of custom and a damaged balance sheet for the company involved. The use of dedicated factories to manufacturing one certain product/product range can present a significant risk. Frozen vs. chilled. Frozen foods can be stored elsewhere, giving a buffer stock. Chilled stock cannot, which can make it more difficult to recover from lost production. Single line product manufacturers where they are sole suppliers to the market generally represent a heavy business interruption risk as there is often no capacity for help in recovery. A high profile loss can affect the market price of goods. Specialist machinery. Longer lead times to replace specialist machinery prevent quick recovery and there is often higher costs for specialist machinery requirements. Long periods for testing and/or commissioning will really add to the business interruption element of any claim. Packaging companies relying solely on one supplier can extend the business interruption loss. An affected company may be trying to resume food production as well as re-establishing the packaging facility. Notifiable Diseases is a commonly requested extension, which could result in a major loss. A high standard in the management of hygiene and clean up procedures must be evident. Seasonal production. The Indemnity period should be considered in full years and peak periods taken into account. If a Food & Beverage customer relies on a seasonal food source, replacement after a loss could be problematic. Stock may be out of season and either unavailable or inflated in price. Robust disaster recovery planning is an important consideration in helping to mitigate business interruption losses.
FOR FURTHER INSIGHT into food & beverage business AND HOW WE CAN SAFEGUARD IT TOGETHER, TALK TO YOUR LOCAL CORPORATE UNDERWRITER, visit zurich.co.uk/broker or follow us @ZurichInsider UKGI551 401446001 CHA Zurich Insurance plc Zurich Insurance plc, a public limited company incorporated in Ireland. Registration No. 13460. Registered Office: Zurich House, Ballsbridge Park, Dublin 4, Ireland. UK Branch registered in England and Wales Registration No. BR7985. UK Branch Head Office: The Zurich Centre, 3000 Parkway, Whiteley, Fareham, Hampshire PO15 7JZ. Zurich Insurance plc is authorised by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. These details can be checked on the FCA s Financial Services Register via their website www.fca.org.uk or by contacting them on 0800 111 6768. Our FCA Firm Reference Number is 203093. Communications may be recorded or monitored to improve our services and for security and regulatory purposes. Copyright Zurich Insurance plc 2013. All rights reserved. Reproduction, adaptation, or translation without prior written permission is prohibited except as allowed under copyright laws.