2015 emerging trends in product recall and contamination final

Risk. Reinsurance. Human Resources.
2015 Emerging Trends in Product Recall
and Contamination Risk Management
A crisis may be unpredictable,
but it should not be unforeseeable
Aon Risk Solutions
Specialty | Crisis Management

1 2015 Emerging Trends in Product Recall and Contamination Insurance
The Year in Review — Product Safety and Recalls . . . . . . . . . . . . . 4
Product Contamination and Foodborne Illness. . . . . . . . . . . . . . . . . . . . . . 4
Restaurant and Food Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Automotive Vehicles and Equipment Recalls. . . . . . . . . . . . . . . . . . . . . . . . 5
Non-Food Consumer Products Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Criminal Prosecution of Product Safety Violations . . . . . . . . . . . . . . . . . . . 7
Regulatory Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Food Safety Modernization Act Update. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Safe Food Act of 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Technological Advancements in Food Safety and Outbreak Tracking . . . . 8
USDA Ground Beef Safety Procedures Updated . . . . . . . . . . . . . . . . . . . . . 9
Industry Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Social Media Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Economically Motivated Adulteration of Food and Food Ingredients . . . 11
Terrorism and Cyber Attacks on the Food System . . . . . . . . . . . . . . . . . . 11
Supply Chain Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Product Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Brand / Reputation Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Claims Preparation Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
International Program Placements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Carrier Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2014 Loss Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Consolidating and New Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Lower Capacity per Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Adverse Publicity and Government Recall. . . . . . . . . . . . . . . . . . . . . . . . . 20
Market Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
U.S. Domestic Carrier Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
London and the Lloyd’s Carrier Review . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Bermuda Carrier Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2015 Global and Contamination Market Capacity . . . . . . . . . . . 24
Product Recall and Contamination, Analytics & Modeling . . . . 26
Claims Preparation, Management and Advocacy . . . . . . . . . . . . 28
Aon Risk Solutions – Global Product Recall Practice. . . . . . . . . . 29
Table of Contents

2015 Food Safety Risk Management Trends
Industry TrendsRegulatory Trends
Product TrendsCarrier Trends
• Social Media
• Economically Motivated Adulteration
• Terrorism and Cyber Attacks
• Supply Chain Integrity
• FSMA Implementation
• Safe Food Act of 2015
• Whole Genome Sequencing
• Strengthened Beef Procedures
• Consolidating and New Capacity
• Capacity per Risk
• Adverse Publicity
• Brand/Reputation Programs
• International Program Placements
• Claims Preparation Expense

The Year in Review – Product Safety and Recalls
Product Contamination and Foodborne Illness
Unsafe products are a significant and growing risk
to the public and corporations. To understand
the potential scale of the problem, consider that
48 million people —1 in 6 Americans—will likely
get sick from foodborne illness this year. Roughly
128,000 of those will need hospitalization and three
thousand will die. For non-consumable products,
the U.S. Consumer Product Safety Commission
(CPSC) estimates that deaths, injuries, and property
damage from non-food consumer product incidents
cost the nation more than $1 trillion annually.
Further, the past year has been the worst for
recalls in U.S. automotive history with nearly 1 in
5 cars and trucks having been recalled in 2014.
Specific to consumable products, the U.S.
Department of Agriculture’s (USDA’s) Economic
Research service released new data in 2014 that
conveys the potential costs associated with 15
major pathogens in the U.S. that are responsible
for more than 95 percent of the illness and deaths
in the United States. Those major pathogens
alone will cost the U.S. economy more than
$15.6 Billion annually. While the data provides
an estimate of costs associated with each specific
pathogen, this research does not include any
loss of consumer confidence in a brand or
business, associated recall expense, or charges
stemming from litigation, which can potentially
be devastating in the event an outbreak occurs.
In 2014, the Centers for Disease Control and
Prevention (CDC) released its annual report on
food safety, produced by the Foodborne Disease
Active Surveillance Network (FoodNet). Each year,
FoodNet reports on the changes in the number
of people in the United States sickened with
foodborne infections that have been confirmed
by laboratory tests. While rates for Salmonella
have shown improvement, others, including
those for E.coli appear to be getting worse.
Restaurant and Food Service Concerns
One in five restaurant workers has reportedly
worked at least once in the previous year while sick
with vomiting or diarrhea. In addition, workers only
washed their hands in 27 percent of activities for
which it was recommended. Until the proper food
safety measures are utilized in the United States,
incidents of foodborne illness occurring from food
service or restaurant operations will not be reduced.
Two of the biggest culprits in causing sickness
in food service establishments are Hepatitis A
and Norovirus. Hepatitis A is a communicable
disease that spreads from person-to-person. It
is spread almost exclusively through fecal-oral
contact, generally from person-to-person, or via
-20%
Pathogen
Campylobacter
Listeria
Salmonella
Shigella
STEC* Non-0157
STEC* 0157
Vibrio
Yersinia
Percentage change in 2013 compared with 2010 − 2012
*Shiga toxin-producing Escherichia Coli † Not a statistically signiﬁcant change
www.cdc.gov/foodnet April 2014
Decrease Increase
-10% 0%
2% †
-3% †
-9%
14% †
8% †
16% †
32% †
7% †
10% 20% 30% 40%

contaminated food or water. The CDC estimates
that 83,000 cases of hepatitis A occur in the
United States every year, and that many of these
cases are related to foodborne transmission.
In May of 2014, an employee at a Red Robin
restaurant in Pennsylvania tested positive for
Hepatitis A, potentially exposing up to 5,000
patrons who dined at the restaurant from May
8 to May 16. Health officials administered more
than 2,300 doses of the Hepatitis A vaccine. In
addition to the cost of vaccination (estimated at
$50 per individual), restaurant and food service
establishments also face the potential loss of
customer confidence and related sales declines.
Incidents of Norovirus dwarf the number of
sickness attributable to Hepatitis A. The CDC and
Prevention estimated that there are 19 to 21 million
cases of Norovirus infections each year. This virus
generally arises from infected workers who touch
ready-to-eat foods with their bare hands. The CDC
reported that about 5.5 million cases of Norovirus
have been food-related. While outbreaks on cruise
ships may get the most press, these incidents only
account for 1 percent of all reported outbreaks.
In a related (and ironic) incident, 216 attendees of
the popular 2014 Food Safety Summit were sickened
during their visit to Baltimore. While food safety
was the topic of discussion, food safety measure
may have unfortunately not been in practice. The
pan-seared chicken breast served by the Baltimore
Convention Center’s exclusive caterer was likely
contaminated with Clostridium Perfringens,
a spore-forming gram-positive bacterium
commonly found on raw meat and poultry.
Automotive Vehicles and Equipment Recalls
The average automobile has over 30,000 parts,
any of which could fail. The nature of the failure
may require the recall of the part in order to
eliminate or minimize the potential for bodily
injury or property damage. The defective part
may be as a result of a manufacturing problem,
use of substandard materials, installation errors
or may lie with the design of the part itself.
The past year has been the worst for recalls in
U.S. automotive history. Over 50 million cars and
trucks -- about 1 in 5 vehicles on the road -- were
recalled. This figure represents more than 5 times
as many vehicles that were sold in the U.S.
As a result of these recalls, the public and media are
increasingly focused on the corporate responsibility
being taken by the automotive industry. Damage to
a company’s reputation and brand can be extreme
when inaction or indifference is perceived. After
perceived government inaction on past recalls,
the National Highway Transportation and Safety
Administration (NHTSA) will most likely increase
the number of recalls. While the industry focuses
on improvements in design, manufacturing and
testing, other factors such as the $1.2 billion
fine against Toyota over missteps in the recall
of 10 million vehicles will likely result in auto
manufacturers recalling on the side of caution.
2008
10,000,000
0
20,000,000
40,000,000
30,000,000
60,000,000
50,000,000
Number of vehicles recalled
20102009 2011 2012 2013 2014

While virtually all auto manufacturers have been
affected by these recalls, none has suffered as
significant damage to its reputation as General
Motors. In 2014, GM alone accounted for over half
of the 54 million vehicles recalled, with 29 deaths
being attributed to faulty ignition switches.
Non-Food Consumer Products Safety
The U.S. Consumer Product Safety Commission
is charged with protecting the public from
unreasonable risks of injury or death associated
with the use of thousands of types of consumer
products under the agency’s jurisdiction.
Deaths, injuries, and property damage from
consumer product incidents cost the nation
more than $1 trillion annually. CPSC’s work to
help ensure the safety of consumer products has
contributed to a decline in the rate of deaths and
injuries associated with consumer products.
In 2008, Congress passed the Consumer Product
Safety Improvement Act, the most comprehensive
overhaul of product safety laws since the creation
of the Consumer Product Safety Commission in
1972. The Consumer Product Safety Improvement
Act of 2008 was spurred partially by major recalls
that occurred during the summer months of
2007, including the recall of over 18 million toys
manufactured in China. U.S. regulators sought to
tighten their authority over product safety. This
law imposed new testing and documentation
requirements, and sets new acceptable levels of
several substances. The Act also increased fines
and specified jail time for some violations.
Toy safety has been an example of the Act’s
success. In 2008, the year the Act passed
into law, there were 172 toy recalls, 19 due to
lead. In 2014, there were only 30 toy recalls
with just one being attributed to lead.
One significant non-food consumer product recall
of note was the recall of over 7 million Keurig coffee
brewers in the U.S. and Canada due to potential
burn hazards. Owners of affected MINI Plus Brewers
were provided with a free repair kit to resolve the
potential issue. Keurig’s share price dropped more
than 3 percent after the recall was announced.
The U.S. Senate confirmed the appointment of
Elliot F. Kaye as the 10th chairman of the U.S.
Consumer Product Safety Commission (CPSC) in
July to a term that expires in October 2020. Mr.
Kaye has identified three major areas of focus
for his term. First, the CPSC will attempt to work
more closely with the industry and voluntary
standards organizations to develop standards
for products that are not currently covered by
regulations and as a result have not kept with
advances in safety technology. Second, Mr. Kaye
will continue to prioritize brain safety in youth
sports during his tenure. Last, Mr. Kaye will
emphasize strengthening CPSC’s line of defense at
U.S. ports to keep dangerous imports out of the
hands of unsuspecting consumers. He noted that
he will be transparent and accessible in directing
the operations of the agency, and will expand
the use of open data and social media to connect
with and empower consumers and businesses.
2008
50
0
100
150
200
Number of toys recalled
20102009 2011 2012 2013 2014
Toy Recall Toy Recall with Lead

Criminal Prosecution of Product Safety Violations
The past several years have seen an increase in
criminal prosecution for food safety violations. Most
recently, in June of 2014, the owner of the company
behind the massive 2010 egg recall agreed to a
plea deal calling for $6.8 million in fines for selling
eggs with false labels. The government blamed its
tainted shell eggs for a 2010 Salmonella outbreak
that sickened thousands and led to the recall of over
500 million eggs. Quality Egg LLC, once one of the
nation’s largest egg producers, faced allegations
of bribing a U.S. Department of Agriculture
inspector to approve sales of poor quality
eggs, selling misbranded eggs and introducing
adulterated food into interstate commerce.
On January 28th, 2014, brothers Eric and Ryan
Jensen who owned and operated Jensen Farms in
Colorado, each received five years probation and
six months home detention and were ordered to
pay $150,000 in restitution. Jensen Farms, linked to
one of the deadliest food outbreaks in history, was
found responsible for the listeria-tainted cantaloupe
that injured 147 persons and killed 36 consumers
in 2011. Investigations by the FDA and the CDC
determined that the defendants failed to adequately
clean their cantaloupe. They then maintained the
fruit in unsanitary conditions. Both defendants
pled guilty to six counts of adulteration of a food
and aiding and abetting. The multi-generation
family business filed for bankruptcy in 2012.
Meanwhile, the sentencing of Peanut Corporation
of America (PCA) executives continues to drag
as attorneys for all three defendants in the
criminal prosecution jointly asked for an indefinite
continuance for objections to all pre-sentence
reports. Former officials at the now-defunct PCA
were found guilty on a total of 98 federal felony
counts on September 19th, 2014 after a near two-
month trial. Stewart Parnell, the one-time owner
of the three-state peanut processing business,
was found guilty on 67 counts charging fraud
and conspiracy, along with intentionally shipping
tainted food. His brother, Michael Parnell, was
found guilty on 30 felony counts, which included
his participation in the conspiracy. Mary Wilkerson,
who was quality-control manager at PCA’s Blakely,
GA, plant, was found guilty on one of two counts of
obstruction of justice. Peanut products processed
at the company’s Blakely, Ga. facility were linked
to the 2009 Salmonella outbreak that sickened
more than 700 people and may have contributed
to nine deaths. The outbreak resulted in the
recall of thousands of products by hundreds of
different companies including ice cream, cookies,
cakes and confectionary products. According to
the Justice Department, the four former officials
misled investigators after they allegedly fabricated
quality assurance labels and continued shipping
products after testing showed Salmonella.
Finally, a federal judge has scheduled early 2016 for
a trial related to safety defects in General Motors
cars, including an ignition switch flaw linked to more
than 30 deaths and the recall of millions of vehicles.
The trial, which would involve a yet-to-be-chosen
wrongful death or personal injury case, would begin
January 11, 2016. It is part of consolidated litigation
involving more than 100 lawsuits against the
automaker, some of which involve economic loss.

Regulatory Trends
Food Safety Modernization Act Update
In 2011, Congress passed the historic FDA Food
Safety Modernization Act. This law updated
the Food and Drug Administration’s food safety
authorities to better address emerging risks
and focus on preventing foodborne illness.
Since that time, the FDA has been tasked with
drafting new rules and procedures to improve
the effectiveness of our food safety system.
Initial rules were drafted addressing seven major
areas of food safety. The public, industry and
other interested parties were then given the
opportunity to comment on the draft rules.
In September of 2014, the U.S. Food and Drug
Administration published its revised provisions
to four of the Food Safety Modernization Act
rules. The rules for produce safety, preventive
controls for human food, preventive controls for
animal food and Foreign Supplier Verification
Programs (FSVP) have been modified to provide
more flexibility to producers and suppliers.
In a settlement over the litigation regarding
timing for implementation of the FDA Food
Safety Modernization Act, the original June
30th, 2015 deadline for the publication of the
seven major final rules was amended. These
rules must now be submitted to the Federal
Register for publication no later than:
August 30, 2015 March 31, 2016
Preventative controls
for human food
Sanitary food
transportation
Preventative controls
for animal food
October 31, 2015 May 31, 2016
Produce Safely Intentional adulteration
Foreign Supplier Verification
Accredidation of third
party auditors
The FDA has agreed to complete the rulemakings
by the recently imposed deadlines. However, if
the Administration believes good cause exists to
seek an extension, it may extend the deadlines
through a written agreement to the parties and
notification through the court. If the parties do
not agree to the extension, FDA can still seek
a change by following another procedure.
The Safe Food Act of 2015
As the new republican controlled Congress began
business in 2015, two Democratic Senators, Sen.
Dick Durbin (D-IL) and Rep. Rosa DeLauro (D-CT)
introduced bills on January 28th that would establish
a single, independent federal food safety agency.
The Safe Food Act of 2015 would establish the Food
Safety Administration with the goal to protect the
public health by preventing foodborne illness,
ensuring the safety of food, improving research
on contaminants leading to foodborne illness,
and improving security of food from intentional
contamination. It would also consolidate all the
authorities for food safety inspections, enforcement
and labeling into the Food Safety Administration
independent of any federal department.
The Act would provide the Food Safety
Administration with mandatory recall authority for
unsafe food, require risk assessments and preventive
control plans to reduce adulteration, authorize
enforcement actions to strengthen contaminant
performance standards, improve foreign food
import inspections, and require full food traceability
to better identify sources of outbreaks.
Technological Advancements in Food Safety and
Outbreak Tracking – Whole Genome Sequencing
The U.S. FDA, CDC, World Health Organization
(WHO) and other public health agencies are
increasingly utilizing cutting edge technologies
including whole genome sequencing (WSG) to
identify sources of foodborne illness outbreaks.
This data is being shared through large databases
accessible nationally and internationally to aid
in the investigation of outbreaks. Traditionally,
testing for pathogens has been performed
utilizing pulsed-field gel electrophoresis (PFGE)
technology. Although effective in isolating various
contaminants, it cannot differentiate between

the different strains. WGS technology is able to
provide more sensitive and reliable data that can
be paired with geographic information systems
to identify the root source of the contamination.
The FDA and CDC utilized WGS successfully
twice in 2014 to identify outbreaks. Listeria
Monocytogenes were first identified in a product
utilizing PFGE to link data archived in PulseNet.
Investigators then used WSG to definitively link
the strain to cheese produced by Roos Foods of
Kenton, Delaware. In essence, the WGS matched
the environmental and food samples with the
CDC’s human samples. Production was suspended
at the facility to minimize the outbreak.
The FDA also utilized the WGS technology to
identify a strain of Salmonella Braenderup linked
to almond and peanut butter manufactured by
nSpired Natural Foods in Ashland, WA, resulting in
the recall of numerous retail brands of the product.
The FDA and other agencies globally continue
to seek new and more powerful technologies
to detect and traceback pathogens. The FDA
in September announced the 2014 Food Safety
Challenge seeking potential breakthrough ideas
on how to find disease-causing organisms in food
– especially Salmonella in fresh produce. This
challenge offers a total prize pool of $500,000.
USDA Ground Beef Safety Procedures Updated
The U.S. Department of Agriculture’s (USDA) Food
Safety and Inspection Service (FSIS) announced
new procedures that will allow the agency to trace
contaminated ground beef back to its source more
quickly, remove it from commerce, and find the root
cause of the incident to prevent it from recurring.
Under the new traceback procedures, FSIS will
conduct immediate investigations at businesses
whose ground beef tests positive for E. coli during
initial testing and at suppliers that provided source
materials. These traceback investigations will begin
as soon as FSIS receives a presumptive positive
result and the grinding facility can provide supplier
information. Previously, FSIS began investigations at
the grinding facility only after a presumptive positive
test result was confirmed, which could take two
days. A similar investigation of the grinding facility’s
suppliers would have taken place 30 days later.
By starting investigations at the point of a
presumptive positive test, the FSIS can save
valuable time. As part of the investigation, FSIS will
also review establishment records to determine
whether the grinding or supplying establishment’s
food safety system experienced a breakdown, and
determine whether the supplying establishment
shipped product that may be contaminated to
other grinding facilities or further processors.
FSIS estimates that dozens more recalls may
occur once these new protections are in place.
Over 18 million pounds of beef, pork, poultry
and related products in 94 separate recalls were
reported by the FSIS in 2014. The primary cause for
these recalls was due to an undeclared allergen.
2014 USDA Meat Recalls by Contaminant
43
6
4
23
5
7
4
Undeclared
allergen
Extraneous
material
Processing
defect
Undeclared
substance
Other**
STEC*
Listeria
monocytogenes
Salmonella
2

During the summer of 2014, we saw an example
of collaboration between the USDA and the CDC
when Wolverine Packing Company announced
the recall of 1.8 million pounds of ground beef
patties and Angus burgers that may have been
contaminated with the E. coli 0157:H7. Federal
government regulators said 11 people in four
states were sickened between April 22 and May 2.
The recall came after the USDA’s Food Safety and
Inspection Service, along with the CDC, identified
patients sickened by E. coli O157:H7. Identified
were five Michigan cases, four in Ohio, and one
each in Massachusetts and Missouri. The meat was
sold to wholesalers, retailers and for restaurant
use. Retail distribution included stores in Michigan,
Ohio, Virginia, Tennessee, Illinois, Minnesota,
Georgia, North Carolina, Florida, Indiana, Kentucky,
Pennsylvania, North Dakota and Wisconsin.

Social Media Monitoring
By now, most companies recognize the power of
social media. That power can be a useful tool in
promoting a company’s brands, but can also be a
double edged sword when things go wrong. Bad
news can travel faster than ever before. Social
media sites are increasingly becoming the way
we read and comment on the day’s events. It
can also be an outlet for disgruntled employees,
customers and special interest groups looking to
cause harm or damage to a brand. Facebook alone
has over 1.3 billion unique visitors each month, and
YouTube reaches more adults age 18-34 than any
cable network and is available in 61 languages.
The ability to quickly spot and respond to trends
involving your products is crucial in today’s
world. Increasingly, companies today are taking
a proactive approach to social media to both
mitigate risk and build trust with consumers. An
assortment of social listening and monitoring
software is now available to assist companies with
their social media strategy. Monitoring for certain
key words and brands can alert a company to
both negative and positive trends involving their
brand. Integrating a company’s public relations,
consumer affairs and food safety and quality teams
can be an effective way to help mitigate these risks
to both regain and build trust with consumers.
Social media not only spreads the news of a
dangerous product faster than ever before; it may
also be used as a means for revenge, financial
gain or other illegal activity. Building a proactive
social media plan should be an essential part of
any company’s overall food defense strategy.
Top Social Media Websites:
Facebook 1.3 Billion monthly visitors
YouTube 900 Million monthly visitors
Instagram 300 Million monthly visitors
Twitter 288 Million monthly visitors
Economically Motivated Adulteration
of Food and Food Ingredients
Over 15 percent of the food Americans eat is
imported from other countries and in fact, 80
percent of all seafood is sourced from outside the
U.S. As supply chains become increasingly more
complex and longer in length, the exposure to
economically motivated adulteration rises. The
National Center for Food Protection and Defense
defines Economically Motivated Adulteration
(EMA) as the intentional adulteration of food for
economic gain. EMA incidents have resulted in
serious unintended public health consequences,
and they illustrate gaps in our regulatory and
quality assurance systems that could be exploited
for intentional harm. The aim is generally not to
harm people, but to profit by fraudulent means.
The Grocery Manufacturers Association (GMA)
estimates that fraud may cost the global food
industry between $10 billion and $15 billion
per year, affecting approximately 10 percent
of all commercially sold food products.
Many foods are known to be susceptible to EMA.
These food products include fish and seafood,
dairy products, fruit juices, oils, honey, spices,
wine, and infant formula. Recent examples include
the dilution of orange juice, the substitution of
cheaper oils for more expensive ones, and the
use of nitrogen-containing chemical additives to
increase the apparent protein content of foods.
Mislabeling is also a common form of EMA where
fraudulent ingredients may be promoted. EMA
is not a new concern, although it may seem like
there has been a recent increase in incidents
over the past few years. This is partly due to
increased media coverage as well as increased
surveillance in certain food products. The number
of documented incidents is most likely a fraction
of the true number of incidents, since the goal
of EMA perpetrators is to avoid detection.
Two of the most noteworthy incidents of EMA
occurred in 2007 and 2008. In 2007, melamine-
Industry Trends

contaminated pet food imported from China
caused the death of countless dogs and cats in
the U.S. In 2008, melamine-contaminated milk
powder sickened more than 290,000 Chinese
children. The melamine had been added to the
product in order raise the perceived protein levels
of the milk powder. Fraud was also a motive
behind Peanut Corporation of America’s actions
in 2009 with the Salmonella outbreak in 2009,
which killed nine people and sickened 700.
Leading Food Fraud Categories:
• Milk products
• Seafood
• Olive oil
• Natural sweeteners
• Coffee and tea
• Organic foods
• Fruit juices
• Spices
• Clouding agents
Terrorism and Cyber Attacks on Food Systems
On December 19, 2014, the U.S. Senate failed to
reauthorize the Terrorism Risk Insurance Act and
with it, created an environment of uncertainty and
volatility within the insurance industry. Thankfully,
on January the 8th, the new 114th Congress
acted quickly with the reauthorization passing
both the Senate and House of Representatives.
In light of this, it is important to understand the
coverage provided for terrorism under most
product contamination and recall policies.
Most product contamination insurance policies
do include a standard terrorism exclusion.
These exclusions first became an issue shortly
after 9/11 and caused concern amongst brokers
and policyholders specific to the malicious or
deliberate aspect of coverage. In order to minimize
this concern, most policies contain “carve out”
provisions where the exclusion does not apply
if the insured or insured products is the direct
target of the act or alleged act of terrorism. It is
important to note that the terrorism exclusion
should not have an effect on the “Accidental
Contamination” portion of your policy. In light
of this “carve out” provision, many policyholders
do not purchase TRIA under these policies.
Many of the recent cyber-attacks on business
have been related to outside vendors accessing
the internal systems of customers. This is also a
concern as relates to manufacturing operation.
Outside vendors may have limited access to
processes that control the manufacturing process
including temperature settings, ingredient
amounts and packaging or labeling control. Slight
variations to any of these processes through
information or data systems manipulation from
an outside vendor or internally, may require
the recall of potentially unsafe products.
Supply Chain Integrity
The effective management of a company’s supply
chain, particularly as it relates to the sourcing of
ingredients or component parts is a significant
factor in evaluating risk. In 2013 and 2014, two
major fast food chains were stung with food safety
allegations. In both cases, Chinese suppliers were
at the heart of allegations that caused losses to each
company in the hundreds of millions of dollars.
Sourcing of ingredients is the obvious concern,
but it is also important to note recalls caused by
component parts and packaging. Mislabeling
of packaging, glass breakage and packaging
design issues have caused significant to
manufacturers over the past several years
and will also need to be considered.
Constellation
Brands
Glass particles in bottles of
Corona (Supplier Issue)
McDonalds Food safety concerns of
Chinese supplier (Sanitation/
relabeling of expired product)
Yum Brands Food safety concerns of
Chinese supplier (Antibiotic
use in poultry by suppliers)

Experts estimate that losses to manufacturers and
retailers due to the counterfeiting of branded
products is approaching $1 trillion annually.
Although manufacturers may perceive the
probability of a counterfeiting event to be low,
the damage and risk to consumer safety and a
company’s brand can be significant. This may
be particularly true if counterfeit ingredients or
components are introduced through the supply
chain process. Recent incidents involving pet food
and infant formula utilizing tainted ingredients
are just two recent examples of the damage.
Depending on how the introduction of tainted
or counterfeit products entered the supply chain,
coverage may be available through traditional
product recall or contamination insurance programs.
Other incidents of counterfeiting, however, may
need to be addressed through supply chain
management. Newer brand reputation insurance
programs are attempting to address the exposures
of counterfeiting, however, until companies
begin quantifying or measuring the financial
impact of counterfeit products, underwriters
will have difficulty assessing the risk properly.

Brand / Reputation programs
Damage to a company’s brand or reputation
continues to rank at or near the top of most
company’s greatest concern. Over the past several
years, we have seen various “brand” or “reputation”
insurance programs being offered, and the insurance
industry continues to develop in this area. Original
attempts to provide coverage focused on offering
public relations and crisis management services to
stave off the effects of a brand damaging incident.
Although offering a wide range of incidents that
could potentially trigger the policy, these programs
did not offer financial protection for income losses.
Newer offerings, however, can now include
financial protection while still offering a wide
array of triggering events such as:
• Recall or contamination
• Industrial espionage
• Workplace violence
• Counterfeiting
• Breach of IT security
• Foodborne illness
• Major litigation
• Loss of key executive
• Other brand damaging events
The programs being offered are customized
to a client’s specific concerns. Programs
typically are characterized by large retentions
and include a financial loss or reputation value
loss threshold that must be met in order for
the policy to respond. Significant capacity in
excess of $100 million, dependent upon the
risk, may be available. While few of these
programs currently exist in the marketplace,
we anticipate carriers continuing to invest in
these potential solutions to reputational risk.
Claims Preparation Coverage
Carriers are increasingly willing to include claims
preparation expense coverage via endorsement
under recall and contamination insurance programs.
This recognizes the additional expense incurred
by insureds in preparing the required claims
documentation and forensic accounting work that
may be required to properly document the claim.
This is an expense that were it not for the recall or
contamination incident, would not be incurred and
therefore should rightfully be covered under the
policy. The concept of claims preparation expense
is fairly common under property policies and is
now being increasingly accepted by most recall
carriers as well. It is also important to work with
your broker in identifying firms with the expertise to
assist with the claims preparation and advocacy task
International program placements
Increasingly, clients are requesting international
placements for product recall and contamination
insurance programs with local policies, premium
remittance and claims payment. However, only
a relative few carriers have the capabilities to
provide this service. Although most carriers
have global office locations, few have filed forms
in each country for this risk. Depending on
the country involved, the filing process may be
time consuming and cumbersome given local
regulations and reinsurance. Typically, carriers
have filed forms in most European countries,
Canada, Australia/New Zealand and to a lesser
extent, certain Latin American countries.
Several of the larger international carriers are seeing
this as an opportunity to provide a local service
others cannot. More specifically, carriers at Lloyds,
and company markets ACE, AIG, Allianz, Liberty
International and XL are each at various stages of
their development of true international program
placements for product recall and contamination.
This is a trend we anticipate continuing and
may be supplemented by inclusions of tax
equalization endorsements attached to policies.
Product Trends

2014 Loss Activity
2014 continued the trend of significant loss
activity for underwriters of product contamination
and product recall insurance. Food and
beverage products appear to have affected
the markets more so than non-food products,
although major automotive recalls have also
dominated the news. Underwriters have
been expressing a need to increase rates and/
or retentions for new business and accounts
and industries with adverse loss histories.
Several events dominated the recall activity and
concerns for underwriters. The recalls listed below
are a summary of some of the more significant recall
events that have taken place over the past 30 years.
Historically Significant Recall Events 1982-2014
Product Company Year Country Recall
Tylenol McNeil Labs 1982 U.S. Product Extortion Incident involving over
30,000,000 bottles of pain reliever due to
suspected cyanide tampering. Estimated costs
in excess of $100,000,000 with majority of loss
due to lost sales and product replacement.
Perrier Water Perrier Water 1990 U.S./France Benzene contamination resulting in recall of
160,000,000 bottles. Brand never re-established
to pre-recall sales level. Estimated at $40,000,000
in lost sales plus value of destroyed product.
Pepsi PepsiCo 1993 U.S. Alleged tampering of Diet Pepsi products with
needles. Loss in excess of $35,000,000 due to
lost sales, rehabilitation and advertising costs.
Jack-in-the-Box Foodmaker 1993 U.S. E. coli contamination of ground beef on West Coast.
Numerous bodily injury claims and 4 adolescent
deaths. Loss in excess of $100,000,000 primarily
due to lost sales and rehabilitating the brand.
Cheerios General Mills 1994 U.S. Contamination of grain by grower using improper
pesticide. Loss in excess of $75,000,000.
Ground Beef Hudson Foods 1997 U.S. E. coli contamination of ground beef patties. Recall
of more than 20,000,000 lbs. of ground beef. The
most crippling effect was not direct recall costs, but
the loss of Hudson’s best customer, fast-food giant
Burger King. Company no longer in business.
Hot Dogs Sara Lee 1998 U.S. 35 million pounds of meat product recall
for listeria. The recall itself cost about $76
million. In addition, an additional $25
million was spent to renovate the facility.
Coca-Cola Coca-Cola
Company
1999 Belgium/
Europe
Loss in excess of $100,000,000 as recall of products
expands from Belgium to 6 European countries.
Snickers and
Mars Bars
Snickers and
Mars Bars
2005 Australia Product extortion in Australia alleging
poison contamination forces recall and
destruction of over 3,000,000 candy bars.
Loss estimated in excess of $10,000,000.
Cadbury Chocolate Cadbury
Schweppes
2006 United
Kingdom
Salmonella contamination resulted in
recall of over 1,000,000 chocolate bars.
Estimated loss in excess of $50,000,000.
Carrier Trends

Spinach Natural Selection
Foods
2006 U.S. Recall costs and estimated sales losses
amounted to $350 million
Pet Food Menu Foods 2007 Canada/U.S. Melamine contamination of wheat gluten used
in various pet foods due to Chinese supplier
resulted in recall of 60 million containers of
pet food. $42,000,000 in losses attributed to
the recall alone, not including lost sales.
Peter Pan
Peanut Butter
ConAgra Foods 2007 U.S. Losses estimated at $78,000,000 in recall
costs plus $55,000,000 in lost sales. Facility
refurbishment estimated at $15,000,000
Pot Pies ConAgra Foods 2007 U.S. The company voluntarily recalled all of its
Banquet and private label pot pies out of
concern for salmonella. Direct recall costs were
approximately $27 million in the second quarter
Tomatoes / Peppers Various 2008 U.S. Salmonella outbreak incorrectly linked to
tomatoes by the FDA costs the tomatoes
industry more than $100 million in related losses
with one estimate as high as $350,000,000.
Eventually, the contamination is traced to
jalapeno and serrano pepper farm in Mexico.
Deli Meat Products Maple Leaf Foods 2008 Canada Listeria contamination found in corned beef
and roast beef products. Recall expanded
to 243 different meat products produced
by Maple Leaf Foods. The packaged meats
recall significantly affected the business by an
estimated $59 million to $69 million before taxes,
including $19 million in one-time direct costs.
Peanuts Peanut Corp.
of America
2008 U.S. Salmonella contaminated peanuts affecting
more than 200 companies and 2000 different
products. Industry losses estimated at over
$1B. PCA declares bankruptcy. Kellogg had
reported losing $70 million due to the recall.
Cookie Dough Nestle 2009 U.S. National outbreak of illness from E. coli 0157
been linked to the product. Company estimated
recall would cost between $30-$50 million.
Hydrolyzed
Vegetable Protein
Basic Food Flavors 2010 U.S./Canada Salmonella contamination results in recall of 177
different products. Affected bulk, ready-to-eat and
ready-to-cook products in the U.S. and Canada.
OTC Children’s
Medicine
Johnson &
Johnson
2010 U.S./Canada Recall of 43 over-the-counter children’s medicines
(135 million bottles) by McNeil Consumer
Healthcare, a subsidiary of Johnson & Johnson. The
recall affected at least 12 countries. Third Qtr. 2012
earnings report listed $665 million in recall costs.

Eggs Wright County
Egg Farm
2010 U.S. Recall of over 500 Million shell eggs due to
salmonella contamination. GMA estimated loss
at $100 Million to the shell egg industry.
Infant Formula Abbott Labs 2010 U.S. 5 million containers of top-selling Similac
powdered infant formula recalled due to
possible contamination by beetles or larvae of
the bugs. The company advised that returns
of the purchased formula may reduce third-
quarter revenue by an estimated $100 million.
Cantaloupe Jensen Farms 2011 U.S. Deadliest foodborne illness outbreak in over
25 years. Listeria contamination results in over
30 deaths and hundreds of illnesses. Dollar
volume of sales drops by 55.7% within four
weeks. Company declares bankruptcy.
Ground Turkey Cargill Meat
Solutions Corp.
2011 U.S. Largest meat recall in history with 36 million
pounds of ground turkey (representing 6% of
annual consumption for the industry) recalled
because of potential salmonella contamination.
The recall and subsequent plant closure led to
130 employees being laid off and one of the
“weakest quarters” ever for their meat division.
Cucumbers/Sprouts European Farmers 2011 Europe Cucumbers initially implicated in over 4,000 illness
and at least 48 deaths. German Federal Ministry
of Food, Agriculture and Consumer Protection,
later announced that seeds of fenugreek imported
from Egypt were likely the source of the outbreak.
EU farmers claimed losses of $611 million.
Peanut Butter Sunland, Inc. 2012 U.S. Over 200 different products recalled. Resulted
in first ever facility shutdown by FDA under FSMA
authority. Company declares bankruptcy in 2013
with between $50-$100 million in liabilities.
Chicken Products YUM! Brands 2012 China Accusations of poultry being fed toxic
chemicals leads to significant brand damage
and China first-quarter loss of 41%. Same
store sales down 20% in first qtr 2013.
Whey Protein Fonterra 2013 New Zealand False report of botulism-causing bacteria. Fonterra
booked loss of NZ$14 million provision for costs
associated with the replacement of recalled
products. Customer Danone sued Fonterra in
NZ High Court after an estimated loss of $407
million in free cash flow due to whey protein
used as an ingredient in their product.

Frozen Foods Rich Products
Corp.
2013 U.S. E. coli contamination results in recall of over
10 million pounds of potentially contaminated
products. Loss estimated at in excess of $10 million
for recall expense, value of products and lost profit.
Yogurt Chobani 2013 U.S. Leading Greek Yogurt manufacturer issues recall
due to mold associated with dairy products.
The resulting negative publicity, destroyed
product and refunds caused significant financial
damage. Actual loss costs unknown.
Meat OSI 2014 China Allegations of unsafe food practices at the
company’s Chinese subsidiary affected a major
fast food chain resulting in lost sales measured
in the hundreds of millions of dollars.
Chicken Products Foster Farms 2014 U.S. Class 1 recall of over 170 different chicken
products to the potential presence of Salmonella
Heidelberg, a rare strain of Salmonella that is
particularly resistant to antibiotic treatment. Foster
Farms invests $75 million in food safety efforts.
Automobiles General Motors 2014 U.S. General Motors announced more than 60 recalls
involving 29 million vehicles. Second-quarter profits
were down 80% from the prior year and included
the impact of $1.2 billion in recall-related repairs.
Fruit Wawona 2014 U.S. Nationwide recall of stone fruits and baked
goods containing potentially tainted fruit.
Beer Constellation
Brands
2014 U.S. Recall of Corona Extra Beer due to glass
contamination leads to more than $10
million in recall-related costs.

Consolidating and New Capacity
Capacity in the recall market continues to grow
with more innovation and solutions being
developed by various carriers on an ongoing basis.
On January 9th, XL Group plc and Catlin Group
Limited announced their agreement to combine
into a single company creating a leading presence
in the global property & casualty insurance and
reinsurance markets. Under the terms of the
transaction, XL will acquire all outstanding shares
of Catlin for approximately $4.1 billion. The newly
combined company will be marketed as XL Catlin.
Both XL and Catlin are significant providers of
capacity to the product recall and contamination
insurance market. In many ways, their facilities
complement one another in terms of geographic
scope with XL more diversified in its distribution
network including Bermuda and the U.S.
and Catlin operating primarily out of Lloyd’s.
Further, while underwriting appetite under both
companies has focused on food and beverage
risks, Catlin has carved itself a significant niche in
the automotive and non-food recall market. Until
the transaction closes, both XL and Catlin will
continue to operate as two separate companies.
Initially, we would not anticipate any significant
change in appetite or capacity, but the combining
of these two firms bears watching. Once the
transaction is completed, which is estimated
for mid-2015, there may be a tightening of
capacity. However, alternate carriers appear to
be prepared to replace any exiting capacity and
in fact, we may see new syndicates or carriers
enter the market to fill this void/opportunity.
Aon Crisis Management will continue to monitor
the situation and provide periodic updates.
In November of 2014, Allianz Global Corporate
& Specialty expanded its offerings within the
U.S. market with the formation of Allianz Crisis
Management. Their focus for product recall will
be on both the food and non-food categories
with a net capacity of €50,000,000. It is their
stated intention to heavily engineer risks during
the underwriting process. Allianz has not yet
released their policy wording, but is structuring
the group with a focus on International Program
Placements (IPP’s). In addition to quoting primary
risks, they will also consider follow form excess. As
yet, they have not named a crisis consulting firm.
Lower Capacity Per Risk Being Offered
We have seen a number of underwriters reducing
their primary capacity on both product recall and
contamination programs. Carriers are looking to
share their risk with other carriers is a trend we
are likely to see continuing. Those underwriters
limiting their risk on primary layers are generally
able to come back in with their additional
capacity at higher layers. Excess capacity is
readily available and competitively priced. As a
result we do not anticipate a significant change
in pricing on an overall program, although
we will likely see an increase in multi-carrier
programs and number of excess layers.
Adverse Publicity Concerns
Underwriters continue to have concerns relating
to adverse publicity coverage triggers. The
intent of the adverse publicity trigger is to
provide coverage in instances were an accidental
contamination has been alleged, although none
has actually occurred. In light of social media, this
is a significant concern, as regardless of whether
or not the allegation is valid, damage to the brand
and profits can occur. The recent examples of
food safety allegations in China are an example
of where actual contamination may be difficult
to prove, yet significant damage resulted.
The majority of domestic carriers continue to offer
adverse publicity coverage, generally to the full
policy limit. The London market has been more
reluctant to offer this coverage as standard and
generally will only offer adverse publicity as a
sublimit. This is more of an issue for companies
with highly recognizable brands and trade names.

U.S. Domestic Carrier Review
Domestically, U.S. carriers appear to be in a stable
position. Although each carrier has to some extent
experienced a difficult 2014, the losses seem to have
been spread between markets. Risk preference
and class selection among carriers continued
to develop in 2014 with carriers focusing their
portfolios towards strategic industries. Domestic
markets continue to provide good competitive
alternatives to the traditional London and Bermuda
markets. The domestic markets have driven
much of the innovation in this class including
impaired property, government recall, adverse
publicity, product refusal and recall liability.
ACE Westchester, a U.S. based insurance division
of ACE Group, and a new player to this field in
2012, had a successful 2014 having established
themselves as a significant carrier for non-
food and automotive product risks. The ACE
Westchester product recall offering can tailor
coverage based on the unique needs of customers.
ACE maintains a capacity of $10 million and will
consider food, beverage, consumer products and
automotive component parts, but seems to have
carved its niche in the non-food categories.
ACE Westchester also introduced ACE Recall
Plus for Small Business an affordable suite of
product recall coverages for companies with
sales of up to $25 million. The facility is focusing
on first time buyers who need the coverage but
find current market offerings cost prohibitive.
The program targets three distinct groups—
manufacturing component parts, consumer
goods and consumable products. Minimum
premiums start as low as $1,000 with limits ranging
from $50,000 to $1 million. Policyholders will
have access to product recall consultants on a
pre– and post–incident basis, allowing the small
business owner to have a business partner who
knows the pitfalls and implications of recalls.
AIG through Lexington Insurance Company
continues as the longest standing product recall
market globally, having offered some form of
this coverage for over 25 years. Based in New
York City, the underwriting team maintains a
strong underwriting discipline for this class.
AIG has significantly broadened its scope to
include large multinational accounts and has a
capacity of $25 million. At the outset of 2015,
Lexington announced Celebrity RecallResponse,
providing recall and related advertising expense
coverage should a celebrity spokesperson
become entangled in an illegal activity, public
scandal or disgrace – or dies unexpectedly.
Houston Casualty Company (HCC) continues to be
a favored market for smaller food and beverage risks.
As of January 1, 2015, HCC will be utilizing a new
policy form for product contamination insurance.
The policy incorporates many coverages that were
previously included by endorsement, resulting in
fewer endorsements. The new form also contains
a number of enhancements over the existing
policy form. Most notably, Government Recall is
now included as an Insured Event and represents
an enhancement over the existing endorsement.
Further, the indemnity period for Lost Gross Profits
has been extended from 15 months to 18 months.
On the primary side, HCC can provide up to $5
Million in capacity for food and beverage companies
with $500 Million in annual revenues and under.
For excess, HCC can provide limits up to $5 Million
excess of any underlying insurance and limits of $10
Million excess of $10 Million in underlying limits for
companies of any size, large or small. Also beginning
in 2015, HCC will be able to provide excess
insurance for companies in the non-food business.
Liberty International Underwriters (LIU) continues
to aggressively expand its portfolio through all
product types with the exception of automotive
component parts. With a capacity of $15 million
and a package that includes third-party recall
liability and impaired property coverage for both
food and non-food products, LIU is a significant
and innovative player in this specialized market. In
Market Update

2014, Liberty has taken a less aggressive approach
to consumable products, limiting the amount
of capacity they will offer on a primary basis.
Starr Indemnity & Liability Company (C.V. Starr)
continues its steady growth across all product
types with the exception of automotive component
parts. Starr has carved its niche through
innovative coverage extensions and competitive
pricing structures. During 2014, we have seen
Starr significantly increase its appetite for larger
risks and commit increasingly larger primary
lines. Of the domestic carriers, they appear
to have weathered losses better than most.
Crum & Forster continued to reposition
their portfolio in 2014 while still focusing on
both food and non-food products, including
automotive products. We have experienced
Crum focusing on limiting their capacity on
primary programs while focusing on greater limits
for excess opportunities with higher rates.
SwissRe has offered this coverage for a number
of years and has recently taken a more aggressive
approach in promoting this class of business.
SwissRe offers coverage for food, non-food
and automotive products with significant
capacity of up to $25 million depending on
the type of products and attachment.
London and the Lloyd’s Carrier Review
The London market and Lloyd’s continues as
a significant and thriving market for this class
of business. The Lloyd’s market is home to 57
managing agents and 93 Lloyd’s syndicates, which
offer an unrivalled concentration of specialist
underwriting expertise and talent and includes
many specialist underwriters writing product
contamination and product recall business.
There are 23 markets that can be accessed
in London for this class of business, which is
broken down by eight global insurers and 15
Lloyd’s Syndicates. All of these markets have
varying risk appetites and capacity. Some
of these carriers concentrate on food/drink
product contamination and some concentrate
on the non-food side such as automotive and
other component part manufacturers.
The London market has suffered from a particularly
active claims period over the past several years
resulting in some restrictions in underwriting
appetite and a reluctance to offer full limits on
certain coverages including adverse publicity
on the food and drink side. Nevertheless,
Lloyd’s remains an innovative, active market,
particularly in the automotive component parts
and non-automotive component parts sectors.
Leading the way at Lloyd’s is Catlin Syndicate
2003 who write all five classes of product recall
and contamination, including Food and Beverage;
Consumer Goods; Restaurant Contamination;
Automotive and Pharmaceutical. Catlin has
their own tailored wordings for all of these
classes of business and has the largest dedicated
product recall team in the London market. They
also boast that none of their wordings have
any condition precedents or warranties.
Early in 2014, Catlin released a new restaurant
wording that improves upon the language found in
their prior policies. One example involves supplier
coverage that is now incorporated as a separate
insured event. In addition, a Public Health Authority
Announcement has been integrated into the new
form which should give a greater extension to the
adverse publicity trigger. Overall, Catlin’s new
wording clearly and concisely lays out terms for
restaurants seeking to explore broader and more
specific coverage in the contamination marketplace.
The next largest Lloyd’s players in this business
are XL, Talbot and Liberty that have significant
underwriting teams and capacity to offer on
London placed programs. Other notable Lloyd’s
Syndicates to mention are Canopius, Ark, Kiln and
Novae who have underwriters with many years’
experience in this class and can provide valuable
capacity on either a primary or excess basis.

XL Syndicate 1209 tend to specialize in the Food
and Drink side but have over the past 18 months
expressed a desire to expand into the automotive
recall sector. In February, 2015, they have released
an XL branded Automotive Recall wording.
The Talbot Syndicate 1183 at Lloyd’s began
providing product recall insurance with a capacity
of $25 million in the summer of 2012 which was
increased to $30 million the following year. Talbot
is focused on addressing three distinct market
segments: Product Contamination Insurance
for the food and beverage industry including
pharmaceuticals and restaurants; Product
Recall Liability Insurance for component part
manufacturers; and First Party Recall Insurance
for consumer finished goods companies.
Liberty International continues to be an active
London market willing to provide both primary
and excess capacity. Traditionally based at
Liberty Mutual Insurance Europe Ltd., they have
now fully integrated their capacity under Liberty
International Underwriters (LIU) Box 336 at
Lloyd’s. Liberty’s London product recall team
will transition their product recall portfolio to the
Liberty Lloyd’s Syndicate 4472, allowing the team
greater flexibility to write business in geographic
areas where they are currently restricted.
The recently rebranded Tokio Marine Kiln
Syndicate 510 is well known for being one of the
more innovative syndicates in the market. Unique
offerings from the syndicate include a supplier
indemnity endorsement, which provides cover
for off specification or faulty materials, as well as
withdrawal of regulatory approval or license at a
named suppliers production facility. Underwriters
will also offer reputational harm coverage which
can be bought standalone or in conjunction with
their product contamination policy. We saw new
capacity entering the London market through
the Ascot Syndicate and the Hardy Syndicate
with other syndicates expanding their capacity.
New in 2014, the Apollo Syndicate developed
a product recall consortium specific to the
automotive and general engineered component
parts sectors and recently increased their capacity
from GBP 5 million to GBP 10 million for 2015.
Bermuda Carrier Review
In light of increasing capacity and appetite globally
for the recall class of business, the Bermuda
market has been less active than in earlier years.
Characterized by high attachment points and
significant capacity, the market is dominated
by XL Insurance, with several of the island’s
carriers including Markel, Aspen, ArgoRe and
AWAC able to provide supporting capacity.
Over the past decade, the Bermuda markets
have been consistent in their approach to these
risks as well as in their pricing philosophy.
Bermuda is an option primarily for larger multi-
billion dollar companies or those willing to
carry a substantial retention. Total capacity
available on the island can exceed $100
million depending on the class of business.

Food & Beverage Non-Food
Carrier Domicile Accidental Malicious Consumer Automotive
Ace Westchester U.S. $10M $10M $10M $10M
Ace European Group Europe/London $10M $10M $10M $10M
AIG (Lexington) U.S./Bermuda $25M $50M $10M N/A
AIG (London) London $10M $50M $10M N/A
Allianz Europe €50M €50M €50M €50M
Allied World Bermuda $10M $10M $10M $10M
Allied World London $10M* $10M* N/A $10M*
Amlin Syndicate 2001 Lloyds N/A N/A $1M* N/A
Apollo Consortium 9398 Lloyds N/A N/A $10M $10M
Arch Syndicate 2102 Lloyds N/A N/A N/A $15M
ArgoRe Bermuda $25M $25M $25M $25M
ARK Syndicate 4020 Lloyds $15M $15M $15M $15M
Ascot Syndicate 1414 Lloyds N/A N/A $25M $25M
Aspen Bermuda $10M $10M N/A N/A
Berkshire Hathaway
International
Insurance Limited
London Unlimited Unlimited Unlimited Unlimited
Canopius Syndicate 4444/958 Lloyds $10M $10M $10M $10M
Catlin Syndicate 2003 Lloyds $35M $50M $35M $25M
Crum & Forster U.S. $10M $10M $10M $10M
C. V. Starr Syndicate 1919 Lloyds $15M $25M $15M N/A
C. V. Starr U.S. $15M $25M $15M N/A
Griffin Underwriting Guernsey $10M $10M N/A N/A
Hardy Syndicate 382 Lloyds N/A N/A $25M $25M
HDI Gerling Industrial
Insurance Company
London €15M* €15M* €15M* case by case
Houston Casualty U.S. $5M $5M N/A N/A
Houston Casualty Excess U.S. $10M $10M N/A N/A
Liberty International U.S. $15M $25M $15M N/A
Liberty Syndicate at Lloyds London $15M $25M $15M N/A
Markel Bermuda $25M $25M $10M $10M
Novae Syndicate 2007 Lloyds $10M $10M $10M N/A
PLIS Lloyds $5M $5M N/A N/A
2015 Global Recall and Contamination Market Capacity

QBE Syndicate 0386/1886
and QBE Insurance
(Europe) Limited
Lloyds/London N/A N/A N/A €15M
SwissRe U.S. $25M $25M $25M $25M
SwissRe International Europe/London $25M* $25M* $25M* $25M*
Talbot Syndicate 1183 Lloyds $30M $30M $15M $15M
Tokio Marine Kiln
Syndicate 0510
Lloyds $20M $20M $20M case by case
XL Insurance Syndicate 1209 Lloyds $25M $25M $25M $25M
XL Insurance U.S. $10M $10M N/A N/A
XL Insurance Bermuda $50M $50M $25M $25M
Zurich Insurance plc London $25M* $25M* $25M* N/A
*Denotes capacity only available for non-U.S.
Food & Beverage Non-Food
Carrier Domicile Accidental Malicious Consumer Automotive

Product Recall and Contamination Benchmarking,
Analytics and Modeling
Data is critical to making intelligent business
decisions. How effectively businesses develop,
manage, and utilize data impacts the quality of
those decisions. Recall and contamination events
continue to receive a high profile in the media
and press. Although large amounts of data are
available through publicly announced recalls,
actual damage or loss information is seldom
publicized or available. The size or severity of
a loss may well be more dependent upon the
handling of the media and public perception
as opposed to the size of the recall itself.
Projecting the exposure to a product recall or
contamination can be a difficult task not only for
the company at risk, but for underwriters as well.
Aon Crisis Management has developed a
benchmarking process that enables clients to better
understand their potential exposure to product
recall and contamination. Utilizing a proprietary
database of current Aon Crisis Management
placements, our benchmarking analysis is able
to provide detailed peer group studies on limits,
retentions and rates on a global basis. This tool
allows us to view data by revenue size, industry
or product category, providing a valuable tool
in helping to determine appropriate limits and
retentions. The data is presented in a summary
format; however, client-specific reviews based
on exposures and products are available.
Minimum
0
$5B Plus
$1B - $5B
$250M - $1B
Less than $250M
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
AverageFirst
Quartile
Mode Median Third
Quartile
Maximum
$20,000,000
$1,000,000
$2,000,000
$500,000
$20,000,000
$10,000,000
$5,625,000
$2,000,000
$77,142,857
$23,366,667
$12,941,176
$5,816,667
$20,000,000
$25,000,000
$10,000,000
$5,000,000
$75,000,000
$20,000,000
$10,000,000
$5,000,000
$87,500,000
$25,000,000
$18,750,000
$8,125,000
$230,000,000
$75,000,000
$30,000,000
$40,000,000
Limits
Product Recall and Contamination
Benchmarking, Analytics and Modeling

In addition to traditional recall benchmarking data, Aon’s Actuarial and Analytics practice in conjunction
with Aon Crisis Management has developed a Product Recall Analytics and Modeling Suite that provides
guidance on the financial impact of decisions made about Product Recall risk and insurance. This additional
service provides specific advice to consider when evaluating program limits and attachment points.
The model helps determine the impact of program structure on retained losses, insurance recoveries, losses
in excess of insurance coverage and premium value. This analytic capability can enhance the decision making
process for multiple objectives.
Minimum
0
$5B Plus
$1B - $5B
$250M - $1B
Less than $250M
$4,000,000
$2,000,000
$8,000,000
$6,000,000
$12,000,000
$10,000,000
$14,000,000
$16,000,000
Retentions
AverageFirst
Quartile
Mode Median Third
Quartile
Maximum
$1,000,000
$25,000
$50,000
$25,000
$3,750,000
$750,000
$250,000
$50,000
$4,785,714
$2,745,000
$644,853
$377,500
$5,000,000
$1,000,000
$250,000
$50,000
$5,000,000
$1,000,000
$250,000
$100,000
$5,000,000
$3,000,000
$500,000
$312,500
$10,000,000
$15,000,000
$5,000,000
$5,000,000
Recall
Event
Gross
Loss
Supplier
Recoveries
Risk
Transfer
Total Cost
of Risk
(Premium and
Retained Loss)
Duration
Regions/
Products
Impacted
Cost to Recall and
Cost of Goods
Lost Sales

When a recall or contamination crisis occurs, events
move quickly. How you respond to these challenges
may well dictate how quickly and successfully you
recover. Identifying the proper resources can
be difficult, particularly for a risk that may have
happened only rarely in your company’s history.
Recovering from a recall efficiently will probably
require a company’s risk management team’s
involvement from start to finish. Our experience has
shown that the longer a company waits to quantify
and document costs and make claims to suppliers
and insurers, the more difficult it is to recover
those costs. The preservation and collection of key
data will begin upon notice of a potential claim.
Claims Preparation, Management and Advocacy
Retain contaminated
product samples
Product testing results
and costs
Destruction
certificates
Invoices and purchase
orders related to the
recall (trucking, storing,
destroying)
Documentation related
to reimbursement of
customers for returning
product
Historical budgets
and forecasts
Costs incurred
for discounting
and couponing
Internal overtime
costs and expenses
Any other extraordinary
costs or expenses
incurred
Other insurance or
indemnification contracts
with suppliers
Inventory listings
and valuation Production costs data
Public relations
and customer
communications costs
Invoices for vendor
services (crisis
management, reverse
logistics, public relations,
others)
Employee
overtime
Historical profit
and loss
Claim Data Collection Requirements

The Aon Recall Crisis Center helps you navigate
the various requirements and responsibilities
of your insurance policy. Paid for under your
policy, various services and specialty consultants
may be available to you. Accessing the proper
consultant in a timely fashion will not only aid
in the successful resolution of your claim, but
can also help insure invaluable assistance.
The Aon Recall Crisis Center maintains a
continuously updated and confidential database
of our clients and the services available from
each carrier. This comprehensive management
system brings all aspects of your policy
together in a structured way by providing a
straightforward solution that can coordinate
the responses and third-party relationships tied
to your insurance policy. This service provides
an effective, automated process and delivers
a high level of management control with
minimal administrative burden on your part.
Aon Recall
Crisis Center
Carrier's Crisis
Management Team
Aon Claims
Management
and Advocacy
Aon Claims
Preparation
and Valuation
Aon Crisis
Management, Senior
Management and
Account Executive

The product recall and contamination insurance
market continues to mature and grow, and despite
the increasing frequency of recalls globally,
new carriers and capacity continue to enter the
market. As a result of certain carriers having taken
significant losses over the past several years, we
anticipate that there may be some tightening of the
market in terms of pricing and capacity. However,
those risks that are well prepared to manage a
recall event and that are able to demonstrate
their preparedness through quality assurance and
planning will be sought after by underwriters.
Carriers will continue to strive to identify and
insure the “better risks.” Many underwriters
will look to diversify their portfolios to spread
their exposures beyond food and beverage
risk. We anticipate that underwriters will look
more favorably at non-food risks including
automotive products because loss trends have
shown this to be a profitable subcategory.
It’s anticipated that underwriters will also look more
favorably upon companies who have demonstrated
due diligence in preparedness and use of outside
resources to assist in the mitigation of their risk.
Whether utilizing consulting services made available
by underwriters or third-party auditors reviewing
their supply chain, it is clear that companies who
look to manage the risk of recall in a holistic manner
will be best prepared to survive a recall crisis.
Transfer of risk through insurance is just one
method to prepare for a recall. A successful recall
risk management program must include upfront
quality control, management of vendors and
contracts, and the ability to respond effectively
and efficiently toa crisis. Underwriters and their
partners can assist in developing a successful
recall risk management program by bringing
valuable expertise to their insureds in the form of
crisis communication, quality control and recall
logistics. This expertise can be the difference
in maintaining the safety of your products,
and protecting the trust of your customers.
2014 Conclusions

Bernie Steves is the Managing Director of Aon Risk
Services Crisis Management Practice based in Chicago,
IL. Bernie is recognized as one of the country’s leading
product recall, contamination, and foodborne illness
insurance specialists. With more than twenty-five
years’ experience in this specialty risk management
class, he works with some of the largest companies
in the United States and Canada to address product
recall, contamination, and foodborne illness exposures.
Bernie’s background includes years of experience
from both the underwriting and specialty brokering
disciplines having specialized in this field since 1987.
He is a frequent author and speaker on the
topics of product contamination and recall
insurance. Bernie is a graduate of the University
of Arizona and holds a Masters in International
Management from the American Graduate School
of International Management (Thunderbird).
He is a licensed insurance producer and a
licensed surplus lines insurance producer.
About the Author
Canadian Food Inspection Agency
www.cfia.ca
Center for Disease Control and Prevention
www.cdc.gov
Consumer Product Safety Commission
www.cpsc.gov
FDA Food Safety Modernization Act
http://www.fda.gov/Food/
GuidanceRegulation/FSMA/default.htm
Grocery Manufacturers Association
http://www.gmaonline.org/
National Highway Traffic Safety Administration
www.nhtsa.gov
Safe Food Act of 2015
http://delauro.house.gov/images/pdf/
SafeFoodAct2015FINALBill.pdf
United States Food and Drug Administration
www.usfda.gov
U.S. Food Safety and Inspection Services
www.fsis.gov
U.S. Dept. of Agriculture
www.usda.gov
http://www.statisticbrain.com/youtube-statistics/
http://techcrunch.com/2014/12/10/not-a-fad/
http://www.statista.com/statistics/264810/number-
of-monthly-active-facebook-users-worldwide/
http://venturebeat.com/2015/02/05/twitter-now-has-
288m-monthly-active-users-but-growth-is-slowing/
Sources
Additional Sources

Aon Crisis Management – Global Product Recall Team
Chicago
Toronto
Mexico
City
New
York
Bermuda
Brazil
London
Europe
Sydney
Hong
Kong

Crisis Management is part of Aon Risk
Solutions, the risk management and insurance
brokerage business of Aon Corporation.
Going beyond traditional risk transfer solutions, our
global network of product contamination and recall
specialists offers a full range of consultancy services,
enabling clients to quantify their risk exposure and
make informed decisions on the optimum balance
between risk retention, risk management and risk
transfer. Our team of specialist brokers, crisis consultants
and in-house claims management combines threat
assessment, impact analysis and crisis management,
and response with individually structured insurance
programs. Our unique, consultative approach enables
our clients to implement the most appropriate
measures to meet their duty of care and better protect
their balance sheet, people, brand and reputation.
Crisis Management
Contacts
Chicago
Bernhard Steves
(312) 381-4945
Bernie.Steves@aon.com
Mary Duhig
(312) 381-4503
Mary.Duhig@aon.com
Jessica Stoneback
(312) 381-4849
Jessica.Stoneback@aon.com
Marty Detmer
(312) 381-5114
Marty.Detmer4@aon.com
Margo Scher
(312) 381-4655
Margo.Scher@aon.com
New York
Jean McDermott-Lucey
(212) 441-1314
Jean.McDermott-Lucey@aon.com
Joseph Stottler
(212) 441-1795
Joseph.Stottler1@aon.com
London
Kary Yates
+44 (0) 20 7086 4411
Kary.Yates@aon.co.uk
Andrew Blackburn
+44 (0) 20 7086 3254
Andrew.Blackburn@aon.co.uk
Teddy Berkeley
+44 (0) 20 7086 0237
Teddy.Berkeley@aon.co.uk
Elton Leung
+44 (0) 20 7086 1347
Elton.Leung@aon.co.uk
Bermuda
Chris Heinicke
(441) 278-1240
Chris.Heinicke@aon.com
Seamus Durkin
(441) 278-1222
Seamus.Durkin@aon.com
Toronto
James Gregory
(416) 868-5792
James.Gregory@aon.ca
Sydney
Karina Rodriguez Diaz
Karina.Rodriguez.Diaz@aon.com
+61 2 92537996
Hong Kong
Julian Taylor
+85228624151
Julian.Taylor@aon.com

About Aon
Aon plc (NYSE:AON) is the leading global provider
of risk management, insurance and reinsurance
brokerage, and human resources solutions and
outsourcing services. Through its more than 66,000
colleagues worldwide, Aon unites to empower
results for clients in over 120 countries via innovative
and effective risk and people solutions and through
industry-leading global resources and technical
expertise. Aon has been named repeatedly as the
world’s best broker, best insurance intermediary,
best reinsurance intermediary, best captives
manager, and best employee benefits consulting
firm by multiple industry sources. Visit aon.com
for more information on Aon and aon.com/
manchesterunited to learn about Aon’s global
partnership with Manchester United.
© Aon plc 2015. All rights reserved.
The information contained herein and the statements expressed are
of a general nature and are not intended to address the circumstances
of any particular individual or entity. Although we endeavor to
provide accurate and timely information and use sources we
consider reliable, there can be no guarantee that such information
is accurate as of the date it is received or that it will continue to be
accurate in the future. No one should act on such information
without appropriate professional advice after a thorough
examination of the particular situation.
04012015 | 16393
aon.com
Risk. Reinsurance. Human Resources.

2015 emerging trends in product recall and contamination final

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