The global food and beverage industry needs innovative insurance solutions amid uncertainties | Insurance business America
The industry is strengthening its resilience
The global food and beverage industry is seeking greater resilience to business interruptions and supply chain volatility in a post-pandemic world.
A new survey has shown that these companies are most concerned about navigating turmoil amid global conflict, climate change and a cost-of-living crisis.
According to WTW’s 2024 Global Food and Beverage Risk Outlook, nearly half of food and beverage companies (48%) viewed business interruption as their top internal risk, followed by supply chain as their top internal (40%) and external (35%) risk. Risk factor.
As uncertainty continues, they are increasingly looking for more flexible and innovative insurance coverage, a WTW leader said.
Food and beverage companies are adapting to the “new normal.”
However, this year’s survey also showed that companies have learned from the financial shocks of recent years. Four in ten companies (41%) say they are looking to increase liquidity, while other key strategic goals include reducing costs (38%) and stabilizing operations (35%).
Encouragingly, almost half (47%) of companies said they review their business continuity plans every six months and 31% said they review them quarterly.
This shift indicates a recognition that financial flexibility is emerging as a powerful risk management tool for food and beverage companies amid a volatile global economy. For the insurance industry, customers want similar flexibility in their insurance coverage. “We are seeing great demand for innovation, particularly in the supply chain space,” said Simon Lusher (pictured), global food and drink leader at WTW.
“Technology plays a key role as customers invest in digital supply chain management tools and freight tracking systems. This technology is now making its way into the insurance industry and allows us to develop solutions based on cargo tracking. There is still much work to be done and we are exploring how digitalization and supply chain development can help us create better solutions.”
There is a danger that there is no one-size-fits-all solution in the food and beverage industry.
In addition to the focus on risk management, rising liquidity shows that “companies are thinking about war chests and having cash to prepare for the unexpected,” Lusher added.
He reflected on this year’s results compared to recent surveys. “In 2022, everyone was recovering from the pandemic but still faced geopolitical tensions and rising crime. We wondered if people would feel more comfortable and if priorities had shifted. To some extent they did, but not as much as we expected,” Lusher told Insurance Business.
Climate change was also a major concern, with nearly three-quarters (71%) of food and beverage companies in the WTW survey citing it as a top environmental factor posing the greatest risk to their businesses.
Extreme weather and changing weather patterns have affected crops from Latin America and Europe to North America and Asia, forcing many companies to adapt their supply chain.
To strengthen their long-term resilience, companies rely on predictive models for long-term investments. This includes planning production facilities, storage and infrastructure placement based on climatic suitability and sea level changes. “Our customers value long-term planning,” Lusher said. He acknowledged that the broad range of food, beverage and agricultural sectors makes it difficult for brokers to address their unique risk profiles.
“They include various businesses from meat processing to crop production. Everyone responds to challenges in different ways,” he said. “Brokers need to understand the complexities and massive pressures on food security.
“The populations are getting bigger and bigger. Environmental problems and global warming increase stress. This is something to keep in mind when developing tailored insurance solutions for food and beverage customers. There is no one size fits all.”
Opportunities in the food and beverage sector
It’s not all bad news for the global food and beverage industry. Despite the turmoil, the sector is largely optimistic about its prospects: 40% of companies surveyed by WTW expect to be somewhat profitable in two years.
One highlight is the development of consumer trends. Two years ago, plant-based meat alternatives were among the top trends in food and beverage, leading to the rise of brands like Impossible Burgers and Beyond Meat. However, consumer enthusiasm for these products appears to have waned.
“It seems that people are increasingly wary of highly processed foods and these meat alternatives. The focus on vegetarian options has diminished and there is a shift towards healthier alternatives rather than meat substitutes,” said Lusher.
Food and beverage companies have quickly capitalized on new trends such as gut health, probiotics, wellness and sustainable production techniques. Given fast-moving consumer demands, brokers must encourage insureds to refine their business focus, manage critical risks and reassess where they may need more protection. “This way, companies are prepared for almost any event and operations can continue moving forward,” Lusher said.
What do you think about risks in the food and beverage industry? Please share them in the comments.
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2024-07-04 17:00:00
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