The recent spate of multi-million pound product recalls from China will lead insurers to reassess how to manage the associated risks, according to industry figures.
Aon associate director Mark Quinn said many customers would soon make it a contractual requirement for their suppliers to buy product recall protection, but cover would be available only after insurers had conducted significant risk assessments and were assured quality control measures were taken.
He said: “Undoubtedly there is interest from the insurance market to offer product recall solutions to manufacturers in expanding economies.
“There are markets that see the development of recall insurance in China as an exciting opportunity, if handled correctly.”
Product recall insurance has become a hot topic in light of recent high-profile cases.
Mattel announced that it would recall 18 million toys last week and Cadbury decided to pull
1 million chocolate bars off the shelves, earlier in the summer, after salmonella was found in its factory production line.
Andrew Miller, manager of risk control surveyors at Allianz, said product recall was one of the main emerging risks for insurers.
He said: “We are a more litigious society now both with product recall and personal injury.”
Despite this, Miller said insurers would not shy away from providing cover.
“Because so many of the world’s goods are made in China, it’s a pretty good sized risk. However, we need to put together a list of questions we’d like to ask, to make ourselves comfortable with that risk.
“Everything has a price and it’s about assessing the risk and choosing the proper premium.”
Because product recall is such a niche area, Quinn said he did not expect to see an explosion of companies looking to break into the market, but rather existing companies that offered the product learning to manage the risk better.