Consultants with specialist knowledge of the sector say that bakery businesses should no longer expect to see year-on-year reductions in insurance premiums, even where they take steps to reduce risks.

According to risk consultancy Jardine Lloyd Thompson (JLT), a spate of high-profile, high-cost fires in the sector over recent years has pushed up insurance costs. Says UK food and drink executive Ian Edwards: "Put bluntly, the time for premium savings is probably behind us. Unofficial statistics suggest that fire losses in the food industry have exceeded £1bn during the last five years." He cites the 2004 blaze at Warburtons’ Wednesbury plant as a case in point. This alone is said to have cost insurers over £40m. JLT bases its assessment on feedback from the top 15 property insurers in the sector.

This view is supported by independent fire safety consultant Alan Gill. He says: "At best, I’ve seen that the largest insurers have held premiums at a level, rather than putting them up."

Lack of understanding

According to Edwards, insurance standards and premiums relaxed after the last ’hard’ market, in the wake of the 2001 World Trade Center attacks in New York. "Many insurers new to the food sector entered this marketplace during 2002-3, seeking healthy premiums, but crucially failed to understand the complex risk exposures," he says.

When Finsbury Food Group company United Central Bakeries (UCB) suffered severe fire damage to its Scottish plant in 2006, insurance company AIG (which now has troubles of its own) paid out the sum of £6.8m. "They were very good," says MD Archy Cunningham. "And they went on to increase our insurance payments by only a minimal amount." He adds: "We negotiated with them through our broker, but after what they had done, there was no way I was going to switch from one company to another."

This "minimal" increase in premiums did come with strings attached. When the two damaged bays of the three-bay factory were being rebuilt at a cost of some £5.5m, Cunningham estimates that around £100,000 was spent on fire security. This included water and CO2 fire suppression systems in the ovens, and a blanket system over the fryer used for UCB’s Yum Yum product. As well as more standard fire detection methods, infrared detection systems were installed near every source of heat and automatic shutters between each bay, linked to the detection and alarm system. There was an additional cost of white rock wool walling between the bays to slow the spread of fire by up to two hours.

The insurer did show some flexibility. "They suggested a factory-wide sprinkler system, but I said ’no’," Cunningham reports. "The cost would have been too high. They’d have liked utopia, but we found a middle way between utopia and pragmatism!"

In fact, many of the measures stipulated by AIG are standard features for new-build bakeries. And established businesses, too, will often find themselves with little option but to invest in fire safety.

Damage to favourable insurance

However, Edwards says the series of costly fires in the bakery sector has helped to reverse the favourable insurance market of the past five years or so. "If risk management standards have been allowed to slip under more relaxed insurer arrangements during the ’soft’ market, an expensive programme of risk improvement measures might be required in order to enjoy like-for-like coverage," he says.

Ex-fire service officer Alan Gill points out that staff training can be just as important as structural and equipment safeguards. This training works on three levels, he says: general fire awareness, specially-appointed fire marshals and incident controllers.

Gill recalls having been at a client’s factory when insurance company representatives were on-site. While not claiming personal credit for this, he says that by being able to explain all the measures in place, his client was able to avoid a potential 10% increase in the premium.

In that case, the insurer was Zurich, said by Edwards at JLT to be the most active company in the sector. He quotes a senior property underwriter at Zurich, Paul Johnson: "We underwrite food and drink risks on a case-by-case basis. Excellence in risk management is a ’must’ for us, and we continue to see a great deal of inconsistency here across the industry."

Coincidentally, as an example of that inconsistency, Johnson cites just the type of ’utopian’ sprinkler system that UCB managed to avoid having to install. Clearly, insurance companies are equally "incon-sistent" in their requirements.

Ultimately, of course, insurance premiums only seem significant as long as fire precautions remain effective - exactly as they should. One bakery company that has implemented an assessment and improvements in fire safety is Cheshire-based Frank Roberts & Sons. As health and safety manager Martin Martlew puts it: "A lot of the measures we’ve taken were done because they were the right things to do in the interests of the business and the employees. Anything else is a bonus."


=== Tighter controls ===

UK silo manufacturer Braby believes not enough is being done to promote the importance of ATEX regulations and is calling for tighter controls by the Health & Safety Executive (HSE). It believes the recession is also likely to make businesses cut ATEX compliance from their costs. The regulations, which came in on 1 July 2003, require all businesses to comply in order to prevent the risk of dust and flour explosions.

Paul Mayer, sales and marketing director, says that you only have to type flour explosions into the search engine on YouTube to see the devastating effects of these types of accidents. "It becomes very frustrating when you see a lack of awareness in the marketplace," he says. "Also, a lack of enforcement through ignorance; people don’t actually understand the implications fully."

He also questions whose job it is to inform businesses of these regulations. "I visited a business yesterday, which had not even conducted the survey inside their premises and clearly does not conform to the legislation," says Mayer. Any businesses found not conforming will be given a prohibition notice and, if found to have ignored it, could be shut down.

Braby supplies silos, storage vessels and handling systems. The Solids Handling and Processing Association (SHAPA) has produced a guidance leaflet, available on the HSE website


=== Oven safety ===

l Ovens should be positioned in accordance with a full fire risk assessment - and the manufacturer’s specification

l Any adjacent processes without direct relevance to baking should have sufficient separation (’bunkering’) to isolate any fire for an hour

l Oven maintenance should be documented as part of general fire risk assessments

l Ovens should be cleaned and maintained in accordance with manufacturer specifications - or even more often

l Drip or crumb trays should be provided beneath the ovens

l Ingredient mixing, or other dust-generating processes, and packing processes, should be located away from ovens

Source: risk assessment consultancy Jardine Lloyd Thompson