Fire is one of the biggest risks that food production facilities face today. For example, in Germany only 2% of the food production facilities considered at risk of fire are equipped with sprinklers, according to a study by the German Insurance Association (GDV). Our research shows that large losses are increasing and single claims are getting larger. Read more here: http://www.genre.com/knowledge/blog/the-impact-of-trends-in-the-food-industry-on-risk-management-en.html

1. Underestimated Fire Risk
in the Food Industry in Europe

2. The food and beverage industry is
one of the largest sectors in the world.

3. The total volume of
world food exports was close to
$1.5Tin 2014
Source: The World Trade Organization (WTO), International Trade Statistics 2014

4. Production
costs are
Profit
margins arewhileIncreasing
decreasing

5. Manufacturers are facing increased pressure
Faster
Production
Larger
Facilities
Just-in-Time
Delivery
New Production
Methods
– to stay competitive

6. Manufacturers are facing increased pressure
New, More Diverse
and Exotic Products
Lower Prices
– to meet the expectations of consumers who want

7. Manufacturers are facing increased pressure
For Hygiene On Ingredient Transparency
on Packaging
– to adhere to regulatory requirements
Even well-known brands use suppliers/manufacturing facilities in countries
with varying degrees of safety standards in place,
leaving them vulnerable to unknown exposures and often leading to large losses.

8. Despite the industry’s focus
on growth and innovation,
most production units have
major deficiencies or are
inadequately protected
against fire.

9. In Germany
only 2% of food production
facilities at risk of fire
are equipped with sprinklers.
Source: The German Insurance Association (GDV)

10. What are leading causes
of fires in
production facilities?

11. Human Error Working Processes Production
Facility Defects
Sometimes new hygiene regulations contradict fire protection measures in food production.
Leading Causes of Fire

12. 7 24 18 18 26 31 26 34 15 34 33 29 36 34
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
12
2015
Total Loss in Million Euro
Number of Losses
Average Loss in Single Claim
€124.6
€283.6
€707.9
€1,159.8
€552.9
€220.2
€183.4
€533.5
€304.2
€983.9
€557.8€557.5
€459.9
€257.0
€104.6
Large losses are increasing.
Single claims are getting larger.
Note: Based on claims from January 2001 to September 2015
Source: Gen Re Research

13. What should insureds do?

14. Ensure fire resistant
separation of
hazardous facilities
(e.g. deep frying,
storage of flammable
liquids, etc.)
Divide facilities into
fire compartments
(e.g. production,
storage, packaging)
Construct buildings
using non-flammable
materials
Fire Prevention Steps

15. Risk Management
Test business
continuity plans,
including alternative
production locations
Install fire
extinguishing
systems in
hazardous facilities
Monitor the facility
with an automatic
fire alarm linked to
the fire department
Equip the facility
with an automatic
sprinkler system

16. What are the implications
for insurers?

17. Equipment cannot be cleaned or repaired, in part due to regulatory requirements.
Due to the just-in-time nature of
the food industry’s supply chain,
small losses cause BIs that
are longer than anticipated.

18. No possibility to outsource.
Production is halted
while rebuilding takes place.
Production alternatives
are restricted,
especially for businesses that require
on-site production, mineral water, for
example, and regional specialties such
as Koelsch, Champagne, Nuernberger
Rostbratwuerstchen, etc.

19. What insurers need to
keep in mind:

20. As facilities become more industrialized,
and involve higher values, insurers should
regard these risks as industrial, rather
than commercial.
Industry and underwriting knowledge are
essential and should include regular site
visits by insurers’ risk engineers.
Careful examination of wordings/special
policies, as well as adjusted sub limits and
total policy limits, are also critical.

21. To learn more,contact
your Gen Re
Account Executive.
© 2016 General Re Corporation | This presentation is intended to provide background information for our clients and professional staff.
It is time sensitive and may need to be revised and updated periodically.
+49 221 9738 939
leo.ronken@genre.com
Leo Ronken