BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
LONDON -- Demand for product recall insurance in the United Kingdom is about as flat as an open can of soda pop.
Despite several high-profile recalls of tainted food and beverages in 1997 (BI, Aug. 4, 1997), a scarcity of such events this year has kept U.K. interest in the insurance low. The only major U.K. recall so far in 1998 was a voluntary recall of more than 2 million liters of contaminated carbonated beverages in June.
David Page, director of the special risks division of London-based broker Nelson Hurst International Ltd., said small product recalls are almost a daily occurrence in the United Kingdom, with children's toys and manufacturing parts among the most frequently recalled products.
However, he said, it is the "big name" food and beverage product recalls that raise public and company awareness of the possible risks and costs associated with contaminated or defective products.
Mr. Page said the June recall of contaminated beverages in the United Kingdom should raise awareness and interest in product recall insurance.
Nevertheless, there is still a mentality of "it won't happen to us" among many U.K. companies, such as manufacturers, suppliers and retailers, that are exposed to such risks, he said.
Mr. Page said awareness of product recall exposures in the United Kingdom is increasing, but it is still "nowhere near where you would think it would be."
He believed large U.S. and European companies are generally more aware of product recall risks than are U.K. companies. "I am constantly amazed at the companies that don't have it," he said.
The beverage recall in June occurred after traces of the carcinogen benzene were found in the supplies of carbon dioxide gas used to carbonate the drinks.
Cadbury Schweppes P.L.C. and Bass P.L.C., two of the United Kingdom's biggest beverage companies, both based in London, recalled several products made with the suspect carbon dioxide.
Cadbury Schweppes recalled a total of 1.5 million liters of bottled drinks, including Malvern mineral water, Dr Pepper soft drink and Schweppes Shandy alcoholic beverage.
Bass recalled about 800,000 liters of bottled soft drinks, including Tango, Pepsi and 7Up.
Neither Cadbury Schweppes nor Bass spokespeople would comment on the cost of the recalls or insurance arrangements.
The two companies made the recall decision independently. There was no recall order made by the U.K. government or the British Soft Drinks Assn. Ltd.
The levels of benzene reported were a negligible risk to public health, according to a statement by the U.K. government's Ministry of Agriculture, Fisheries and Food. It said citizens in urban environments are exposed daily to benzene levels 40 times higher from traffic fumes.
A statement by the BSDA also said the benzene levels did not raise public health concerns and any actions taken by U.K. beverage companies were to ensure the quality of their products.
Ian Harrison, underwriter at Lloyd's of London syndicate 623, which is managed by Beazley Furlonge Ltd. and markets a product recall brand protection policy, said Cadbury Schweppes and Bass handled the benzene incident very well. "They got the message out clearly and quickly and the publicity died, which shows the crisis was managed well," he said.
Mr. Harrison said product recall insurance is aimed at companies like Cadbury Schweppes and Bass. "You would expect them to have it," he said. But he noted that product recall insurance is usually confidential, to protect against acts of extortion.
Nelson Hurst's Mr. Page agreed that large companies are the prime market for product recall insurance, but they don't always have it. "You expect (these types of companies) to have cover, but it is not always the case," he said.
Mr. Page said suppliers to consumer product companies are also heavily exposed to product recall risks, but they usually have even less awareness of their exposure than manufacturers of consumer products.
The contaminated carbon dioxide was supplied to Cadbury Schweppes and Bass by the chemical company Terra Industries Ltd., of Severnside, England. Terra is one of four suppliers of carbon dioxide to the U.K. beverage industry, according to the British Soft Drinks Assn.
Terra spokespeople could not be reached for comment on the incident.
Mr. Page said the beverage recall case highlights the risks in manufacturing and production supply chains. "Everyone in the supply chain should have some form of product recall, especially if they supply retailers or big-brand manufacturers," he said.
Mr. Page said small companies are most at risk, as they can often get "knocked out" by the costs of recalls that big companies can usually absorb.
Mr. Harrison agreed that the beverage recall raises the question of risks facing suppliers. "In the past, companies were only focused on their own production," he said. "Now there is a growing recognition that a supplier can be a weak link. The lesson is to keep a close eye on suppliers."