Have your risks outgrown your insurance?
What New Zealand meat processors should be thinking about now
New Zealand’s meat and poultry sectors operate in an increasingly complex risk environment. Cyber incidents, biosecurity threats, product contamination, equipment failure, regulatory obligations and supply chain disruption can all have consequences that extend well beyond an immediate operational issue.
For processors, exporters and other businesses across the supply chain, that raises an important question: has your insurance programme evolved at the same pace as your risks?
Traditional approaches to insurance may not always reflect the interconnected nature of today’s exposures. As operating models, technology and supply chains change, businesses should consider whether their insurance and risk management strategies are keeping up.
Product recall can become a much bigger business event
For food processors, a recall can quickly extend beyond removing affected products from shelves.
There may be costs associated with tracing and withdrawing products, destroying or reprocessing stock, notifying customers, managing communications and responding to lost sales or disruption.
This is particularly relevant in New Zealand. New Zealand Food Safety (MPI) advises that product recall insurance is optional and is typically excluded from standard business insurance. It notes that specialist recall insurance can potentially assist with recall costs, customer costs, business interruption and promotional expenses, depending on the policy.
For meat processors, the question is therefore not simply whether product liability cover is in place, but what actually happens financially if a significant recall occurs?
Business interruption is no longer just about physical damage
Fire, flood and machinery breakdown remain important risks, but they are not the only events capable of stopping or slowing production.
A cyber incident could disrupt critical systems. A biosecurity event could affect operations or supply. A utility failure could interrupt production. A problem elsewhere in the supply chain could leave a processor without a critical input or route to market.
Yet the insurance response to these events can vary significantly.
Businesses should consider the scenarios most likely to interrupt operations and then examine whether their insurance programme responds to those scenarios, rather than assuming that having business interruption insurance means every interruption is covered.
Biosecurity and food safety deserve particular attention
New Zealand’s reliance on primary industries makes biosecurity and food safety particularly important considerations.
Alongside preventative controls, businesses should understand the potential financial consequences of an incident. These could extend across production, suppliers, customers and reputation.
New Zealand Food Safety provides specific procedures and templates for food businesses to develop and implement recall plans, including simulated or mock recalls.
Testing those plans can help businesses identify operational weaknesses before an actual event occurs, while also providing an opportunity to consider where insurance would, and would not, respond.
Cyber risk now reaches the processing floor
As meat processing becomes more connected and technology-dependent, cyber risk is no longer solely an IT issue.
Operational technology, automated processing, refrigeration and monitoring systems, logistics platforms and interconnected suppliers can create dependencies that affect production.
This makes it worth looking beyond whether the business simply “has cyber insurance”. Processors should consider how a cyber event could translate into lost production, spoiled stock, equipment disruption, recovery costs and supply chain impacts, and how those losses interact across cyber, property and business interruption policies.
Governance matters too
The conversation should also extend beyond individual insurance policies.
Cybersecurity controls, food safety procedures, biosecurity management, maintenance programmes, incident response and workplace health and safety all contribute to the overall risk profile of a processing operation.
In New Zealand, WorkSafe New Zealand is the primary work health and safety regulator. There is an expectation of good documentation, processes and training to support effective health and safety governance. Where governance deficiencies are identified during a WorkSafe investigation, the consequences may be severe both financially and to the reputation of the business.
A more useful question for management is therefore: if a major event happened tomorrow, do we understand how our controls, response plans and insurance programme would work together?
Where could the gaps be?
For New Zealand meat and poultry businesses, a regular insurance review should consider areas including:
product recall and contamination
cyber liability and cyber-related business interruption
machinery and equipment breakdown
traditional and non-damage business interruption
supply chain and contingent business interruption
environmental liability
directors’ and officers’ liability
statutory liability
marine and transit exposures, particularly where products are exported
The important point is not that every business needs every form of cover. It is that the insurance programme should reflect the organisation’s actual operational dependencies and loss scenarios.
Looking ahead
New Zealand’s meat industry has always managed risk well. What is changing is the way those risks intersect.
An incident that starts with technology, contamination, equipment or a supplier can quickly become an operational, financial and reputational issue.
That means insurance should not sit separately from the broader risk conversation.
For meat processors, the opportunity is to bring risk management, business continuity and insurance together, testing whether the programme built for yesterday’s risks remains appropriate for the business operating today.
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content in this publication.