Industry seeks more insurance options against food safety risks

05/08/2012 04:54:00 PM
Tom Karst

DALLAS — Fresh produce marketers looking for insurance against market losses caused by food recalls and food safety scares caused by other companies don’t have a solution.

David DurkinBut David Durkin, principal with Olsson Frank Weeda Terman Matz PC, Washington, D.C., said that the farm bill might address the issue.

Durkin was part of a May 1 panel discussion at a United Fresh 2012 grower-shipper workshop.

Durkin said food recalls can effect a large swath of producers because of public uncertainty over the scope of the recalls. Consumers may just decide not to buy a certain food item from any source, even if they hear a problem is limited to a region or company.

The permanence of information and stories on the Internet also broadens the effect of food recalls, he said.

In response to these risks, Durkin said some are looking at policies that would allows growers be protected from risks that cannot be controlled by the producer, including food recalls by competitors.

Federal crop insurance provides against low crop yields or declines in price or both. Durkin said some lawmakers are interested in greater options for producers.

Durkin said there is language floating around Capitol Hill that would direct the Risk Management Agency to conduct a feasibility study related to food safety events. Lawmakers seek to determine whether or not producers who are not at fault can insure themselves against losses from food safety events, he said.

The challenge to expanding crop insurance options for specialty crops is the trend to reduce federal budget expenditures. Another probability is that any insurance product would not likely include processors. Other difficulties include the uncertainties of measuring the risks of specialty crops. Yet another problem is defining the “trigger” where an insurance product would begin to apply, Durkin said.

“If you are a tomato producer and some (other) tomato producer has a recall and the bottom drops out of the tomato market, if people just stop buying tomatoes — can that be a definable event for insurance purchases for insurance purposes, a loss that could trigger coverage?” he said.

Durkin said there is a need for more exact information on markets for perishable commodities.

“The underwriters and the RMA are going to have to get more comfortable on how to obtain appropriate price data in order to develop these insurance products,” Durkin said.

Will Steele, president and chief executive officer of Frontera Produce and vice chairman of the United Fresh Grower-Shipper Board, moderated the panel.

Panelists Mary Chevoya, owner/agent for CSI Insurance Group, Fresno, Calif., and David Mace, underwriter for CSI, discussed private insurance options available to companies facing a food recall.

Mace said there has been a 300% increase in recalls since 1999.

“When we are not directly involved but we are impacted so severely, we have nothing to hang on to,” Steele said. “In many cases, the ones not directly involved are just as devastated as the ones that were.”



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