Liability costs involving food contamination are soaring, and a globalized supply chain has made risk management much more challenging.
In a new report, Swiss Re says that the number of annual food recalls have nearly doubled in the U.S. since 2002, affected by regulatory changes and a more globalized food supply system. Also, food contamination now costs the U.S. public health system $15.6 billion per year in terms of health care and lost wages. Nearly 9 million Americans got sick from contaminated food just in 2013, translating to more than 50,000 hospitalizations and 2,377 fatalities.
“In a more globalized economy, ensuring the highest level of food safety is becoming an even greater challenge for firms,” Jayne Plunkett, Swiss Re’s head of casualty reinsurance, said in prepared remarks. “Today’s ingredients and technologies are sourced worldwide. This leads to greater complexity for food manufacturers and consumer and regulatory demands on companies are continually increasing.”
Swiss Re found that half of all food recalls cost the affected companies involved more than $10 million and that this underscores the value of risk transfer through insurance.
Among Swiss Re’s other findings:
- Food recall losses for U.S. companies of more than $100 million are possible, excluding reputational damage.
- Demographic change is exposing more sensitive consumer groups to contaminated food risks, such as aging societies and an increase in allergies in the overall population. Malnourishment in many countries has also contributed to this exposure risk.
- Companies can reduce problems by applying risk management tools in food production, and adapting them to local markets.
- Insurers can counter the surge in food safety risks by providing risk management expertise and supplying coverage that address recall and product liability risk
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