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Product recall insurance vital for business protection

9 September 2021

A product recall can have a significant impact on any business making it essential to have the correct insurance in place. For manufacturers, recalls damage brand reputations, bottom lines and share prices.

The risks of product recalls have increased due to more stringent global regulatory rules and safety requirements with the most common recalls affecting child safety seats, cosmetics, food, medication, toys, and vehicles.

The economic impact of a product recall include shipping costs, warehouse costs, disposal costs, and restocking costs.

Reportedly the biggest recall of all time involved faulty air-bag inflators made by the now bankrupt Japanese automotive parts company Takata and in 2016 the company estimated total recall costs of Euros 20 billion ($24 billion). Globally, 100 million inflators are under recall and regulators say it could take until 2023 to recall and fix every vehicle.

In the food and beverage industry, product quality and consumer safety are absolutely critical for fresh or frozen products. The costs incurred by a recall include having to handle the recalled product, replacing it and possibly being held financially responsible for the consequences of the recalled product.

Nearly two-thirds of food-processing executives expect the number of food-safety claims in the industry to continue rising over the next year, according a survey of 100 agribusiness leaders by the law firm Lathrop GPM LLP. Six in 10 say they have seen an increase in claims since the pandemic began.

Food recalls may happen for many reasons, including but not limited to:

· Discovery of organisms, including bacteria such as Salmonella or parasites such as Cyclospora.

· Discovery of foreign objects such as broken glass or metal.

· Discovery of a major allergen that does not appear on the product label.

Human error -including mislabelling- and supply chain disruption are key areas that can trigger claims and proper vetting of suppliers is crucial.

Recent recalls include.

· January 2020 in the UK Cow & Gate and Tesco recalled 15 types of baby food jars as a "precautionary measure" amid concerns some may have been tampered with.

· October 2020 in Canada certain lots of Cottonelle-branded flushable wipes were recalled due to being contaminated.

· January 2021 in the USA Target recalled 181,000 Cat and Jack children's swimsuits due to the snaps breaking causing a choking hazard.

W Denis is ideally placed to help businesses within Europe and the UK by providing insurance solutions to enable businesses to mitigate their exposures to product recall, extortion claims and the related costs and expenses. W Denis has access to a wide range of insurers within the UK and European markets including Lloyd’s of London and Lloyd’s Brussels.

For more information or to obtain a quotation visit or contact Vida Jarašiūnaitė

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