Food, Safely

If ever a corporate sector faced a cascade of perils and challenges to its business model, it is the food, agriculture, and beverage (FAB) industry.

Animal pandemics surge and ebb, threatening countless numbers of livestock. Climate change is altering its basic business fundamentals. Recalls are complex to manage and underinsured. It is at the whim of government activity, from regulations to tariffs. And FAB is a more technological industry than one might imagine, with related exposures.

The centrality of the FAB industry to the U.S. and global economies, and the associated potential for widespread harm when those sectors suffer, are unquestionable. Agriculture, food, and related industries comprised 5.5% of U.S. gross domestic product in 2023, in total contributing over $1.5 trillion, according to the U.S. Bureau of Economic Analysis. Farms alone provided $222.3 billion of that amount. As of 2022, the agriculture and food industries were connected to just over 22 million part- and full-time jobs, for 10.4% of total employment in the country.

“The FAB industry is facing a wave of evolving risks that go beyond traditional concerns. These include rising commodity price volatility, supply chain disruptions, cyber threats, climate change, and regulatory pressures— all of which are becoming more interconnected,” says Ciara Jackson, Aon’s global food, agribusiness, and beverage leader. “Dual catastrophe events—such as a natural disaster occurring alongside a cyberattack or geopolitical disruption—pose significant risks to the FAB sector.”

These threats come even as the industry consolidates and restructures to meet consumer desires, with the corresponding need to rethink scale, market and customer access, innovation, and supply chain management, Jackson adds. Adding to the challenge, many FAB subsegments tend to be highly competitive and low-margin.

Adverse events to date have proven painful, though usually not fatal, to individual industry participants, says Matt Klein, U.S. practice leader, food, agriculture, and beverage, at Lockton.

“The financial, operational, and reputational impact can be huge for companies and affect the viability of the business,” he says. “It’s tricky to say how many businesses go under due to a single event, but we know that some businesses never fully recover.”

Kids fruit puree pouch manufacturer WanaBana, for example, filed for Chapter 7 bankruptcy liquidation in May 2024 after a major 2023 recall following discovery of high levels of lead in its apple cinnamon puree products.

Still, Klein says it is “exceedingly rare,” even in the worst food safety scenarios, for companies with strong underlying business fundamentals to fail, noting that Chipotle, Blue Bell Creameries, and hummus maker Sabra all survived catastrophic reputation risk events.

E&S Market Flow

The FAB sector is so complex and challenged by interlocking risks that its brokers and carriers must have adequate expertise to ensure their clients are sufficiently insured.

“It’s a segment of business where if you look at the history, the landscape is littered with [brokers and carriers] who have tried to go into ag and have failed miserably,” says Craig Welsh, head of traditional and non-traditional distribution at Ohio-based mutual insurer Westfield. “You really have to deal with people who understand it because of the complexity of it.”

A significant amount of coverage has migrated to non-admitted excess and surplus lines, Klein says. That includes a large portion of property, stock throughput, and product recall placements. Klein says the percentage of Lockton’s FAB book in non-admitted E&S has nearly doubled from five years ago.

An excess and surplus lines specialist confirms the migration of FAB accounts from the admitted market to excess and surplus lines, though he could not offer specific figures. “The submission flow has certainly increased as many of the standard agricultural package markets have continued to revisit capacity deployment and push ‘fringe agricultural accounts’ [accounts whose categorization as FAB is questionable] away from oversubscribed standard market FAB products back into the general casualty marketplace,” says TJ Collins, executive vice president and branch leader at E&S specialty insurance brokerage Amwins.

Limits there have been reduced. For standard market excess casualty, placements that once offered a $25 million limit have been scaled back to $10 million, $5 million, or even $2 million, Collins says. In some cases, they’re not available at all. As a result, retail brokers are often left with significant gaps in capacity as many traditional excess standard markets seek higher attachment points. But specialty carriers in the E&S market are ready to do business, Collins adds.

Some lines serving the FAB sector have always been strong E&S plays, notes Rob Balogh, executive vice president, product recall, at Amwins.

“Product recall has always been an E&S market play as none of the standard markets offer a monoline offering,” Balogh says. “However, many of the standard markets offer versions of product withdrawal expense at a sublimit. Although this offering exists, it is narrower in scope than what the E&S market has to offer. The admitted market offering is limited from both a policy trigger and element of loss standpoint. Any insured seeking true product recall coverage would have to obtain via the E&S market. As a result, it’s hard to say how much [product recall] business has transitioned from the standard market to the E&S space.”

The Industry Assesses its Risks

In January 2024, broker WTW surveyed 400 senior risk management decision-makers at leading food and beverage companies globally on hazards facing the industry—specifically primary risks and opportunities, how they confront climate-related challenges, and what strategies they employed for risk mitigation and future planning.

The report found declining confidence in the respondents’ ability to control their risks. Seventy-five percent reported being “somewhat or completely in control,” down from 89% in the 2022 survey.

Among internal risk factors that pose the greatest risk to organizational success over the next three to five years, respondents listed business interruption, supply chain and infrastructure, and labeling and packaging, according to WTW’s Global Food, Agriculture, and Beverage Risk Report 2024. Externally, over that same time frame, they highlighted changing tastes and preferences, supply chain and infrastructure risk, and regulatory risks. Taken together, the findings highlight significant concerns about global disruption to the industry.

“The food, beverage and agriculture industry faces a tall order in the coming years—feeding more people with less land and more extreme weather, while reducing the impact of food and beverage production on the environment,” the WTW report noted. “Geopolitical tensions and inflation spirals have made this job harder, highlighting the sector’s vulnerability to volatility in the price and availability of raw materials. With this instability comes potential for further disruption in the industry’s resource-dependent supply chain. Even for an industry used to overcoming adversity, that’s quite a list of challenges.”

Health Threats

According to reports in February 2025, more than 157 million poultry birds have been slaughtered in North America since the start of the H5N1 avian influenza outbreak in 2022, says Robert Heinzl, senior underwriter for livestock at Convex, a global multiline specialty reinsurer with a Lloyd’s syndicate. Recent reports suggest that around 48 million birds have been culled across the United Kingdom and European Union over that time, he adds.

As of November 2024, the costs associated with the ongoing outbreak for one avian flu strain, highly pathogenic avian influenza (HPAI), had exceeded $1.4 billion in the United States, including $1.25 billion in indemnity and compensation payments for culled flocks, according to the U.S. Department of Agriculture (USDA). As a basis for comparison, total poultry sector sales in 2022 were $76.9 billion, rising 67% from 2021, according to a USDA sector profile.

Initial cases of H5N1 in U.S. dairy cows were identified in March 2024, according to the Centers for Disease Control and Prevention.

There have also been fewer than 100 cases of human infection in the United States, with one known death. The disease does not appear to have established human-to-human transmission.

“If that ever changes that’ll be something that we’re really watching very closely, not only for the health and wellness of everyone here, but also, when you have sick workers, you have potentially compensable medical and indemnity expense as well as a loss of production while workers are recovering,” says Jason Mandik, U.S. central zone head of risk management at AXA XL.

H5N1’s risk frequency has risen over the past half-decade, with its seemingly seasonal basis extending for longer periods. Meanwhile, low-pathogenic strains of bird flu might be developing into high-pathogenic strains, “providing a further concern for farmers,” Heinzl adds.

Avian flu coverage, including for the current H5N1 strain, is largely unattainable at present given the industry is in the middle of a cycle of active transmission, Klein says. “Broadly speaking, in terms of coverage for H5N1, there is no appetite for that at the moment while there’s an active transmission happening.”

Heinzl concurs: “If the disease, and in this case avian flu, is already present or endemic in an area or country, then there is less likelihood of any insurance cover being offered. For bird flu, this can mean that at specific times of the year, there is no cover being offered in any meaningful amounts that may help risk transfer from the farms.”

Prices have risen alongside the number of cases and as insurers have tightened capacity over the last 12 months amid their losses in the past three years, according to Heinzl. Clients should expect premium increases of up to 500% for more limited covers, if that cover is even available, he says.

Close collaborations between carriers and brokers are key to maximizing existing coverage, including by managing potential exposures. Carriers should strive to avoid aggregations that could inflict serious losses, Heinzl says.

The supply chain for poultry and eggs can affect losses and the need for coverage, says Glenn Drees, managing director, food and agriculture, at Gallagher. In the current market, increasing prices can lead to poultry and egg producers being underinsured if the value of their products exceeds their initial insurance limits. Producers should ensure their insurance coverage aligns with the current value of their assets for lines where coverage can be more easily increased, Drees says.

Meanwhile, other animal diseases, such as African swine fever and foot-and-mouth disease, represent additional cyclical pathogenic risks.

“If you were talking to me a year ago, or even two years ago, you would have wanted to talk about African swine fever, because that was a major issue for companies producing or selling pork products,” Klein says. “It was spreading like wildfire, and we were very concerned that it was going to make its way into the United States.” That epidemic has receded in many parts of the world, for the moment, he notes.

Many FAB producers may need to seek government compensation. For farmers, programs like the USDA Livestock Indemnity Program or emergency funding through the Animal and Plant Health Inspection Service can help cover losses tied to the depopulation of herds from infectious diseases, says Zach Finn, director of risk management and crisis response at Hub International subsidiary Henriott Risk Management and Insurance.

Recalls

The USDA and Food and Drug Administration (FDA) in 2024 together announced 296 food recalls, according to data from the nongovernmental organization PIRG. Recalled food was linked to 487 hospitalizations and 19 deaths.

Food producers remove their products from the market, sometimes at government direction, to prevent people from becoming sick by consuming the item. Specific causes include identification of bacteria or parasites in the food.

The federal agencies announce food recalls on a regular basis. In May 2025 alone, the USDA announced four public health alerts and five product recalls, including 256,000 pounds of canned beef stew due to possible contamination by foreign material.

Contamination from physical foreign materials, such as wood, glass, plastic, or metal, has become a growing source of recalls and product liability claims, says Jason Berkland, vice president of commercial agricultural sales and underwriting at Nationwide. This trend spans products regulated by the USDA and FDA, which appear to be joining producers in paying more attention to the risk, he says.

“Today’s food companies are far less willing to take reputational risks tied to contamination complaints, leading to a greater number of recalls and insurance claims,” Berkland says. “This issue becomes even more complex when an insured company supplies ingredients to other manufacturers, introducing the potential for downstream property damage and product liability exposure.”

Allergen-related recalls also remain a top concern across the industry, Berkland adds. Most often, these events are triggered by contamination during product transport, storage, or processing; they risk consumer health and open the door to regulatory action, reputational damage, and costly recalls, he says. Berkland says agents and brokers should review clients’ needs and consider recommending comprehensive product recall insurance, which covers recall costs, crisis response, and third-party liability.

Calculating the average cost of a product contamination event is challenging for various reasons, Klein says. To start, the numbers for a product recall and contamination event aren’t always published. In addition, not all FAB businesses purchase product contamination insurance; even if they do, they may blow through limits anyway.

Calculating the overall costs is also tricky, as they encompass not only recall and replacement of the product in question but also third-party downstream costs and business interruption due to lower consumer confidence, Klein explains.

However, recall risk is escalating, in part because the growing acuity of forensic technology is becoming a sword for litigants in product recall lawsuits, by tying outbreaks to particular sources, Finn says. He highlights a recent statement from Amwins that regulatory and public health agencies are regularly using whole-genome sequencing “to precisely trace pathogens from patients back to specific food products, processing environments, or supply chain nodes,” increasing the potential for recall and litigation for food and beverage supply chains.

Climate and Severe Weather

In the WTW report, 71% of respondents from the FAB industry cited climate change as one of the leading environmental hazards facing their business.

“Agriculture is very sensitive to weather and climate. It also relies heavily on land, water, and other natural resources that climate affects,” the U.S. Environmental Protection Agency (EPA) states on its website. “While climate changes (such as in temperature, precipitation, and frost timing) could lengthen the growing season or allow different crops to be grown in some regions, it will also make agricultural practices more difficult in others.”

Among the risks, according to the EPA: changing conditions for growing crops in different regions, for better (longer growing seasons) and worse (hotter seasons requiring more irrigation); increasing threat of wildfires that can damage farmland; expanded occurrence and range of insects, weeds, and diseases; more frequent heavy precipitation, eroding soil and depleting soil nutrients; and exposure dangers for agricultural workers.

Finn says the ultimate solution is to spread risk more broadly and to tie climate coverage to coverage for other perils. That, he says, could involve requiring insureds to buy coverage for low-frequency, high-impact events by including them within insurance more commonly seen as obligatory, such as general liability insurance.

Monitoring patterns of weather and weather risk is important across the industry, Drees says. Events that cause $1 billion or more in damage are not restricted to the usual suspects— hurricanes in Florida or wildfires in California. Now the Midwest, especially the upper Midwest, finds itself at greater risk.

“We are spending much more time educating clients on wind and hail deductibles,” according to Drees. “On the prevention and risk mitigation side, we’re also discussing with our clients the importance of wind-rated roofs and improved maintenance inspection.”

In its 2024 report, WTW urged FAB companies to assess potential impacts of different physical climate change scenarios on their supply chains.

Some insurers are adopting metrics to measure the progression of climate change. AXA XL, for example, is measuring factors such as water stress and climate incidences to identify evolving effects of climate change based on the type of crop, its yield, and geography, including identifying geographies that may one day be suitable for cultivation, Mandik says.

“We are asking clients to look further into the future and consider risk over a longer-term horizon; instead of just thinking about risk over the next three to five years, or five to 10 years, they should consider risk over the next 20 to 50 years,” says Sue Newton, GB food and beverage leader at WTW.

WTW’s Climate Quantified tool provides a global map of weather patterns, with data that enables the company to model changes up to 50 years into the future, Newton says. This helps businesses quantify the financial impacts of climate change on their operations and assets, including those of their supply chain partners.

Government Activities

Responding to the Trump administration’s frequently shifting tariff policy presents a massive task for the FAB sector, Klein says.

Tariff risks affect different segments in different ways, he notes. Large agricultural importers and exporters depend on free trade agreements, leaving them at the mercy of tariffs and their associated market volatility. Agriculture as a subset of the food supply chain is arguably the most trade dependent.

“Tariffs create a lot of volatility, as the importer is the one that is ultimately paying the tariff-incurred expense. All of our insureds that import product are being tasked with determining the amount of additional expense to either internally incur or pass through to the consumer,” Mandik says. “Rating based on commodities and not gross revenue in consideration of a potential tariff pass-through will smooth out an insured’s exposure basis fairly and prevent unnecessary pricing volatility of their risk.”

Captive insurance structures can help clients mitigate these risks, Klein says. Single-parent captives, for example, spread the risk. Risk-sharing partnerships are another option.

As tariffs potentially squeeze supply chains, insureds can fall back on capabilities honed during the COVID-19 pandemic, Drees says.

“I think the biggest and most important thing for any company is understanding your business interruption exposure, your contingent business interruption exposure, and your supply chain risk,” Finn says. “What’s your most important thing? If you’ve got three plants and they are not at 100% capacity, maybe that’s not the biggest risk. But if one supplier drops out and you can’t produce your core product, that’s existential.”

Business exposure coverage must also be reexamined given the potential for longer timespans to receive critical equipment, Drees says. “We talked to all of our clients about their 10 most critical pieces of equipment and their plan to acquire that piece of equipment if something happens to their facility.”

Some government-oriented challenges to the industry don’t have ready insurance solutions, such as those involving regulatory drivers, Klein says. The FAB industry has long worked to expand visa programs for agricultural workers. The challenge is increased today given the Trump administration’s “adverse stance on immigration and so that’s going to be pushing clients’ cost structures higher.”

New regulatory imperatives, such as the U.S. Department of Health and Human Services’ Make America Healthy Again (MAHA) initiative are also adding new regulatory risks.

“I think the MAHA movement is probably going to be one of the most disruptive things that we see in the food space, depending on how much of it gets implemented by HHS or Congress, because of the changes that are going to need to be made with respect to products and ingredients that can no longer be sold in the United States, or that restrict the use of pesticides and other chemicals that are used in farming,” Klein says.

MAHA and other regulatory initiatives to change the way food is produced, or the ingredients that go into food, will create temporary volatility as companies adjust to the new regulatory landscape, Klein says. The degree of impact will vary.

“If you remove red dye No. 3, most global food companies have a substitute they are selling in other countries such as the EU already,” Klein says. “But if the government bans the use of chemicals in farming, you’re talking about a system-wide shock with severe production yield and cost consequences that would upend our food supply system.”

Technology and Data

Cybersecurity is a critical rising exposure for the FAB industry. In a February 2022 article, Leader’s Edge reported both the advantages and potential pitfalls of the food and agriculture sector’s digital transformation. While these advances promise to improve business processes and help companies transition to a decarbonized economy, cybercriminals are quickly entering this sector and finding weak points, demonstrating the need for cyber insurance tailored to the sector and IT-related risk mitigation techniques.

Artificial intelligence (AI) brings additional risks and benefits to the industry, Aon’s Jackson says. “AI is helping companies enhance efficiency, improve forecasting and upskill their workforce. However, it introduces risks such as data privacy concerns, cyber vulnerabilities, and potential regulatory challenges.”

Aon encourages its clients to use AI in risk modeling, to buy cyber insurance, and to establish an overall framework for responsible use of the technology. From there the benefits can flow—companies are already applying AI to predictive maintenance for food processing and to enhance supply-chain logistics, according to Jackson.

Drone technology is also challenging coverages, says Andy Gerlach, manager at Randolph Mutual Insurance in Steelville, Illinois.

“People are spraying with drones now instead of using crop-dusting planes and they’re trying to get that drone risk in as part of their blanket coverage for their farm,” he says. “We don’t know how big that risk is, how many times will those drones drop and then all of a sudden just wreck, and how bad will the damage be? How easy is it to repair? How do you know? We don’t have any data of how that’s going to turn out. Whether we cover it depends on how much they want on the drone and what they’re using it for.”

Insufficient Coverage

Even as the FAB industry faces these large and varied perils, insurers struggle with client willingness to adequately fund some products.

“Whether it’s a livestock mortality policy or even a parametric policy [for weather risk], those are the types of products where you’re really only expecting to have an incident happen one in every 10 or 20 years,” Klein says. “They’re very expensive, and if your thought process is that you want to insure that risk, you should in theory be purchasing them every year. But because they are expensive, if other aspects of the insurance market, like property insurance, harden, those are oftentimes the first things to get cut as well, because they carry a hefty price tag with a very low probability of payout.”

In its 2024 report, WTW in particular found insufficient extreme weather and product recall insurance. For example, 29% of FAB respondents said they had insurance covering property damage from extreme weather, but it did not extend to business interruption.

Fifty-six percent of respondents did not have specific product-recall insurance, indicating they believe public liability coverage would apply in such cases. Those policies, though, “only cover limited recall losses and lack the crisis management and brand rehabilitation support which can be critical to recovery,” the 2024 report says.

“Product recall is a business interruption cover first and foremost, and if this policy is not in place, businesses will not have the cover elsewhere in their program,” Newton says. “Losses can be very significant and businesses do not always understand the extent of their self-insured exposure as a result of not taking out this cover.”

Based on estimates from Henriott Risk Management and Insurance, FAB companies are buying about one-sixth as much recall and contamination insurance as they are product liability coverage. That ratio is insufficient, Finn asserts. Though rather than pointing to product availability or cost, Finn says the crux of the issue may be agents’ and brokers’ reluctance to discuss recall policies they don’t understand.

There also can be a lack of business imperatives to buy product recall cover, Finn says. While FAB companies’ failure to retain property liability may produce downstream exposure for business partners, that may not be the case for failure to retain product recall coverage. That means those partners may not press those FAB businesses to obtain it, he says.

For some lines, clients may find better insurance options than several years ago, says Matthew Brott, executive vice president at Amwins.

The property insurance market for the food, beverage, and agriculture sectors has become increasingly competitive due to expanded capacity from both incumbent carriers and new market entrants, Brott says. “This increase in supply is creating a more favorable environment for insureds, offering them a broader range of choices than was available just a few years ago—when many programs faced challenges in securing adequate capacity. As a result of this heightened competition, insureds may benefit from improved terms and conditions.”

New Products Gain Popularity

As the FAB industry faces an increasingly complicated risk landscape, a variety of unconventional risk transfer solutions are becoming more popular.

Structured solutions and insurance-linked securities (ILS) are increasingly relevant and affordable tools for managing risk in the FAB sector, Jackson says.

Structured solutions are customized insurance programs that combine elements of traditional coverage with financial features like multiyear terms, aggregate deductibles, or embedded financing, helping clients manage volatility and budget predictably, she says.

Insurance-linked securities are financial instruments for insurers to transfer high-severity bundled risks to capital markets, offering an alternative to traditional reinsurance. “We use these tools to help clients in low-margin industries, like FAB, access broader risk financing options and build resilience against complex, large-scale exposures,” Jackson says. “Their growing popularity reflects a shift toward more innovative and flexible approaches to risk management.”

In some cases, the required level of traditional insurance capacity may not be available for FAB clients, meaning they need to use alternative sources of risk capital, Jackson says.

Gallagher also offers some parametric policies, Drees says, which provide payouts based on a specific triggering event. For the FAB industry, Drees says weather events are the most typical. “If there is a freeze and the orange crop is damaged, the juice processor will have no oranges to process. The farmer can buy crop insurance. The processor cannot. Parametric insurance could be purchased based on freezing temperatures and protect the processor.”

Risk Mitigation

Many brokerages and insurers have turned to improving their clients’ risk mitigation alongside their coverage products.

Livestock producers, as an example, are laser-focused on biosecurity at the farm level to prevent cross-contamination and disease spread, Klein notes.

An effective risk-mitigation plan should identify key risks across the operation, outline mitigation strategies, and include steps to ensure continuity in the face of disruptions, Nationwide’s Berkland says.

Nationwide’s risk management team works closely with food operations to turn these plans into action, but brokers and agents play a critical role in this process. “They’re often the first to identify gaps and bring resources to the table,” Berkland says. “By helping their clients build out comprehensive risk management plans, they create more resilient, better-protected operations. We’ve seen real improvements in loss outcomes through these initiatives.”

As an example, Nationwide’s BinStrong initiative encourages producers to invest in stronger grain bins that can withstand high winds, hail, and severe weather—conditions becoming more frequent in many regions due to climate volatility. “We provide education and resources to help producers choose safer, more durable storage structures that reduce the risk of collapse and post-harvest losses,” Berkland says.

Risk management also includes organization actions to diversify and reduce any particular risk to the business as a whole, Finn says. “If you’re only selling feed to chickens, that’s not a good idea. You probably want to diversify and sell to other consumers and that analysis is the kind of thing we’ll do,” he says. “We’ll map supply chains. We’ll look at the flow of raw materials. Do you have sole-source suppliers or high concentration of supply countries? Are you segregating exposures where possible? Are you segregating your flocks in different locations geographically and trying to manage your exposures in those kind of ways, versus looking for an insurance solution?”

Several brokers also suggest hedging through commodities as part of a risk mitigation strategy. Through hedging, larger and more sophisticated insurance clients can address availability of food and beverage staples, Klein says. It enables them “to lock in upside or downside price risk, particularly during times of heightened volatility,” Klein says, noting that Lockton will help connect clients with hedging specialists. “So, if clients are concerned about major swings to commodity markets resulting from tariffs, or from other politically motivated forces, they can look to hedge their price risk by using hedging products. This is a built-in level of price protection versus being exposed to the open market.”