New Software Tells Food Companies Risk from Recalls

Insurance Company, American International Group (AIG) today launched NOVI, a web-based service to help companies estimate the cost of recall incidents, and expanded its available accidental contamination coverage limits to $35 million.

In the Insurance Journal they said “On average, 30 class I and II product recalls occur every week in the food and beverage industry in the United States, and another 22 equivalent recalls are reported in Europe, according to AIG analysis of data from the U.S. Department of Agriculture and the European Union Rapid Alert System for Food and Feed’

This figure may be a little misleading because some companies will recall numerous products An example Peanut Company of America products were in over 3500 foods in the following categories- Brownie , Cake and Pie , Candy Product, Cereal , Cookie , Cracker, Donut , Dressing and Seasoning, Fruit and Vegetable, Ice Cream, Peanut, Peanut Butter, Peanut Paste,

Pet Food, Pre-Packaged Meals, Snack Bar, Snack and Snack Mix, Topping. One recall like this can esque the results. In the average there are less than 10 recalls in the United States some of which will have multiple items recalled.

Expenses resulting from a  recall can include replacement and destruction costs and lost profit from plant shutdowns, government intervention, and brand damage.

AIG’s NOVI is a web-based service that provides food and beverage companies an estimate of their probable maximum recall loss in the event of an accidental contamination. The estimate uses more than 80 data points and a proprietary methodology based on AIG’s more than 25 years of contaminated product insurance experience, analysis of thousands of recall incidents, and input from food safety consultant, NSF International.

Novi helps food and beverage manufacturers make more informed decisions about how to manage their risk,” said Nicky Alexandru, vice president of Crisis Management, Global Casualty, AIG Property Casualty. Companies are unsure of the potential magnitude of financial impact from a recall. As is the case with Peanut Company of America a recall can force a company into bankruptcy.