In 2020, the insurance industry faced a challenging market cycle driven by a variety of reasons that resulted in large losses in the insurance and reinsurance industry. These factors included several consecutive years of negative interest rates, an increase in global fatality due to catastrophic risks and a high incidence of accidents from pre-eminent industries of combustible building materials.
Increased premiums and protection requirements
As a result, insurance capacity was reduced (it was no longer such a profitable market), leading to higher premiums and stricter requirements for protection measures. In response, insurance companies have adopted a more selective approach to risk insurance.
Impact on food and chemical industries and need for adaptation
As a result, premiums were rising considerably in the following years, especially in those industries that experienced higher accident rates such as waste management, recycling plants, chemical industries, plastics, paper and food sector among others. Some companies in these sectors were left without coverage for a while until they implemented protective measures to be insurable. Even if they complied with the regulations, many of these companies were unable to meet the requirements of insurance companies.
At present, the market appears to have stabilized for certain sectors, although for the food and chemical industries the situation remains rather restrictive. The Spanish Federation of the Food and Beverage Industry has identified lack of insurance as a serious problem. Some companies have been forced to resort to self-insurance, which compromises the liquidity of their businesses, while others have been able to access insurance but with compensation limits considerably lower than their needs; and with very high premiums and franchises.
Fires in food factories, one of the main risks, endanger not only the entire supply chain but also potential material damage to facilities, raw material costs and even in some cases personal injury. In short, events of this magnitude can put the very viability of a company at risk. Comprehensive insurance coverage is therefore essential to mitigate such risks.
Fire prevention recommendations and measures
The high level of protection required by insurance companies, especially in fire prevention, includes a number of requirements and recommendations designed to minimise potential damage in the event of fire. These actions include implementing automatic detection systems, sectoring of installations, good distribution of BIEs, hydrants throughout the perimeter, proper maintenance of electrical panels, sprinklers in warehouses, appropriate procedures (self-inspections, training, awareness raising) and above all to establish a solid internal risk prevention and management policy.
The key: collaboration between insurers, clients and insurance brokers
The process should be collaborative between insurance companies, which should suggest appropriate and feasible improvements according to each client’s activity and capacity. The client must make the necessary investments while the insurance broker must support him by following up on recommendations and negotiating with insurance companies to obtain the best possible material damage coverage.
In conclusion, investment in safety and effective risk management are key pillars for the sustainable future of the food and chemical industries. These actions not only protect the business from possible adversities, but also facilitate access to insurance solutions that ensure its long-term growth and continuity.