Posted in News on 04 Dec 2018

Over the last 18 months, there have been reports which could lead to increased pressure on insurance rates on food processing operators globally.

Reasons for this include the prevailing use of composite/’sandwich’ panels, and cladding, in building construction. Composite panels are commonly used for insulation in ambient/ chill/ cold stores, sandwiched between metal, often aluminium, sheets. These panels can be highly combustible, and present a challenge to fire services in controlling the spread of the fire once ignited; so even relatively small incidents can result in serious damage to buildings, equipment, machinery and stock.

Composite panels were originally developed as a means of providing a cost effective, lightweight and weathertight building enclosure that could be erected fairly rapidly. Concern around polystyrene, polyurethane and similarly made composite panels then began to grow as they started to become more widely used for internal partitioning within the food industry, especially cold storage.

Early this year, Thomas Foods International’s (TFI) Murray Bridge beef and sheep-meat processing plant located in South Australia suffered major damage from a fire that started when sparks allegedly ignited the insulated panelling during maintenance. The fire, which ‘caught’ onto foam-filled panels, destroyed the plant’s boning room which was part of a USD 30m plant upgrade implemented between 2013 and 2015.[1]

Adam Bragg, head of Alesco’s LatAm Property team commented -

“The Thomas Foods International fire has had a pronounced impact on the Lloyd’s market in respect of this class of business. Reports indicate that the damage caused may reach the AUD 400m mark.

As a consequence, not just meat processors but all food industry risks, especially those where EPS (Expanded Polystyrene) is included are likely to experience significant hikes in premium. Our brokers have reported that underwriters are quoting increases on renewals as high as 50% on certain accounts. While every clients’ risk is unique, it indicates a more general hardening of the market and clients need to ensure they are prepared.”

Insurers have had significant exposure to claims involved with the use of EPS panels due to the fact that the risk of total loss, even in the event of a small fire, is higher than normal.

Even though using composite panels in building construction carries risks, with the correct planning and a robust risk management programme you can take advantage of some of the benefits of using these materials by practicing some of the following tips -

  • Good standards of fire protection, such as installing a sprinkler system throughout the premises and purchasing a smoke detector will help to minimise the risk of accident.
  • Continuous checking for damage to the panels, e.g. accidental impact by FLTs/loaders, and replacing these often key to good housekeeping and maintenance.
  • Good management and protection against criminal or anti-social activity can also be key mitigators of risks associated with fire damage.

Using a robust risk management approach will help differentiate your risk at renewal, which can go a considerable way in minimising potential rate increases. In addition, utilising a specialist broker with long term experience will guide you through the process of how best to protect your risk at renewal, to ensure that the market recognises the measures that you are taking to manage the risk of a claim, and reflects that fairly in the renewal price.