Management Consulting

The food and drink industry is currently facing significant challenges in renewing insurance programs due to increasing premiums, tightening terms, and a shortage of capacity for certain risks. This shift follows a prolonged period of declining rates, which has now reversed, leading to substantial price hikes—sometimes as much as 100%—particularly in property and business interruption insurance. The Grenfell Tower fire has heightened insurer caution regarding the use of composite panels, compelling food and drink businesses to demonstrate robust risk management practices to secure favorable terms. Many companies in this sector operate on thin profit margins, making them particularly vulnerable to rising insurance costs. As property and business interruption insurance typically represents a large portion of their expenses, any significant increase in premiums can severely impact profitability. Insurers are responding to this market pressure by increasing deductibles and altering terms and conditions, which can lead clients to consider reducing coverage, such as shortening business interruption indemnity periods. However, this approach is risky, as it may leave businesses inadequately protected in the event of a claim. To navigate these challenges, food and drink businesses are advised to start their renewal discussions early—ideally three to nine months in advance. This proactive approach allows companies to assess their risk retention strategies and improve their risk profiles by implementing requested risk management improvements. Insurers are increasingly valuing businesses that demonstrate a commitment to risk management, including investments in fire safety systems and effective management of composite panels. Additionally, reviewing the values at risk ensures that businesses are neither over-insured nor under-insured, which is crucial in a volatile market. In summary, the food and drink sector must adapt to a more challenging insurance landscape by enhancing their risk management practices and engaging closely with brokers to present their risks effectively. This strategic approach can help mitigate premium increases and secure appropriate coverage, ultimately protecting businesses from potential uninsured losses.