Product Contamination Insurance Prompted by Food Recalls

A new policy being launched by XL Insurance (Bermuda) Ltd goes beyond standard policies by offering coverage for government recalls.

Recent U.S. food safety recalls involving eggs and peanuts and the belief Congress will enact a tougher food safety law have prompted XL Insurance (Bermuda) Ltd (XLIB) to offer a new Product Contamination policy. XLIB will host a seminar today at its offices in Hamilton, Bermuda about current regulatory and food safety issues in North America and will present the new policy to brokers and their clients.

XLIB and Lloyds' said this is the first policy to offer broad-form coverage for recalls in North America that result from adulterated or contaminated ingredients. "The exposures of food and drink companies have been increasing with the growth in the global supply chain and the more proactive approach of regulators in recent years," Ed Mitchell, Global Product Recall Manager for XL Insurance, said in a Lloyds' news release. "The more that food and drink companies source their ingredients from around the world, the more prevalent the supply chain risk becomes."

Last year's recall involving salmonella in peanuts killed nine people and cost firms affected by it more than $1 billion, according to the release, which says FDA recalls rose from 283 in 2008 to 557 in 2009 because of that recall.

XLIB Chief Casualty Underwriter Beth Piggott said the new policy is being launched at a critical time. "The last few years have seen a significant rise in the frequency of recalls in North America combined with a noticeable increase in the size and scope of the recalls and a corresponding increase in financial severity. These recalls are under growing scrutiny from regulators," she added. "The August 18th recall of 380 million eggs in the U.S. is a typical example of this trend. In addition to the proactive stance taken by the U.S. Food and Drug Administration, we also think it likely that the proposed Food Safety Enhancement Act could pass into law in the relatively near future. This would give regulators authority to mandate recalls and will put food and beverage companies into unchartered waters in terms of the food safety environment in which they are operating. XLIB has been writing Product Contamination business for over 10 years, and we have used this experience to re-engineer our policy to provide broad and contemporary cover to respond to today's challenging regulatory environment and the growing capacity needs of companies seeking higher limits."

The policy will provide coverage for:

  • Accidental contamination
  • Malicious contamination
  • Product extortion
  • Forced and/or government recall
  • Adverse publicity
  • Priority 24/7 crisis management

XL Insurance is part of XL Group plc.

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