Evolving Risks Demand a Sharper Focus on Protection Gaps in New Zealand's Food Agribusiness and Beverage Sector
Key takeaways
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Fire risks are becoming more complex across the Food, Agribusiness and Beverage (FAB) sector, with lithium-ion batteries, hot works and Expanded Polystyrene (EPS) construction driving claims.
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Standard Property and Business Interruption policies can contain gaps in cover that are critical to the FAB sector relating to growing crops, livestock, land damage and supply chain dependencies.
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Business continuity planning and specialist risk engineering can help FAB businesses identify and address exposures to support better decisions on risk transfer.
In responding to Aon's 2025 Global Risk Management Survey, Food Agribusiness and Beverage (FAB) organisations ranked business interruption, supply chain failure, climate change and weather and natural disasters in their top ten risks. Here in New Zealand, convergence of these risks is having an impact on the sector, and many operators may not be adequately covered under standard insurance programs.
From fire hazards driven by new technology, management systems and legacy building materials, to the emerging threat of cyclones disrupting supply chains, New Zealand’s FAB businesses are operating in an environment where the risk landscape is rapidly evolving. Understanding what is actually protected in their policy is essential for industry leaders to maintain stability when hazards put production and profits at risk.
Fire Risk Challenges: Hot Works, Batteries and Building Materials
According to Hayden Picard, Director Risk Engineering for Aon New Zealand, fire remains one of the most frequent and costly loss drivers across the FAB sector. “Three key challenges are increasing claims activity,” he says. “Hot works continue to be a leading cause of fire incidents, and when policy conditions are not met, this can compromise cover and claims. EPS is widely used in construction across meat processing, cold storage and food manufacturing sites. Following global large-scale losses from fire involving these materials, insurers can have limited appetite for covering these assets.”
Lithium-ion battery use is becoming more common in FAB sector equipment including forklifts, energy storage and electric vehicles, and protocols for managing fire risk from this new technology have yet to catch up. "Thermal runaway can occur if batteries are damaged,” says Picard. “Fire services, such as Fire and Emergency New Zealand, note that people do not associate their lithium-ion powered items with a rise in fire risk. With the increased take up of this technology, we are seeing a significant rise in battery fire incidents in Aotearoa and around the world, and the FAB sector is also exposed to this risk. It's a moving risk that will evolve as battery technology develops and it's definitely on the underwriters’ radar."
Fire events often result in longer-term impact for FAB sector operators. Smoke and soot contamination can leave food-grade plant and equipment unfit for use which extends disruption. "We see a significant focus on addressing smoke damage and contaminants when dealing with food and beverage," says Woodrow Bould, Director, Aon Global Risk Consulting for Aon New Zealand. "This has real implications for the indemnity periods businesses choose for their business interruption insurance."
"When an industry experiences a large loss, insurers can lose appetite or require specific controls. By designing and deploying control measures, risk engineering can help businesses meet underwriter requirements and secure appropriate rates for insurance cover."
Hayden Picard, Director Risk Engineering, Aon New Zealand
The Gap Between Protection and Peril
Many FAB operators review business interruption cover on the basis that key perils are included. But a gap can emerge following a loss when the covered property element of the policy becomes critical for a successful claim.
"Industrial Special Risks (ISR) policies have two important components," says Bould. "The peril and the property insured both matter. Growing crop, livestock and land are exclusions that often become relevant for wide area damage claims such as cyclone and earthquake. Many businesses aren't aware that these exclusions exist and do not have a plan to address the uninsured component of their losses. When silt from flooding or landslide prevents a harvest, or cyclone conditions disrupt dairy herd production for weeks or months, the financial losses can fall outside their cover.”
For businesses further up the supply chain that rely on a network of suppliers, the nature of New Zealand's geography can magnify gaps created by these exclusions. As long, narrow islands with an agriculture-dependent economy, the country's entire FAB supply chain can be affected by a single weather event, with crop yields decreasing significantly due to crop losses or land damage which an ISR policy would not cover. Cyclone Gabrielle in 2023 and the Kaikoura Earthquake in 2016 both show how damage to roads, rail and port infrastructure produces significant revenue loss, even where operators have not directly experienced damage to property. Standard exclusions, or specific policy limits on third party property, mean that even where the peril is covered, the chain of losses it triggers may not be adequately insured.
"Growing crop is a major part of the food and beverage business in New Zealand. For manufacturers relying on delivery stock that grows out of the earth, when that crop is lost the resulting business interruption is uninsured."
Woodrow Bould, Director, Aon Global Risk Consulting for Aon New Zealand
Putting Business Continuity Planning to the Test
Identifying coverage gaps is the starting point, but understanding how those gaps interact with the realities of an operation turns this knowledge into actionable risk insights. Even when FAB businesses have contingency supplier arrangements in place, for example, these can be tested and found lacking. In one case, a client secured alternative grain suppliers in the event of crop failure. When Cyclone Gabrielle affected approximately 60 per cent of grain supply across their key growing region, both price and quality changed overnight. What seemed like supplier diversification became a more concentred risk for their operation.
"Clients are typically optimistic about risk," says Bould. "Having a team come in and challenge assumptions highlights opportunities to be better prepared. Our clients know their businesses inside out but we can help them plan for risk and loss consequences they may not have considered."
Addressing Emerging Risks With Alternatives
Where standard insurance programs fall short in covering these growing FAB sector exposures, alternative risk transfer options can fill the gap. Parametric solutions — which pay out based on a defined event trigger, such as wind speed or rainfall measurement, rather than a verified property loss — are increasingly relevant for FAB businesses facing disruption from a changing climate.
"There are a number of alternative methods of transferring risk,” says Bould. “Retention on your balance sheet, a captive structure and parametric options are some of the solutions we explore with FAB clients," says Bould. "The best choice for any business is based on understanding the risk, modelling the potential loss, and making sure the balance sheet can withstand events we're now seeing more often in New Zealand."
In Australia, where cyclones have long been a feature of the FAB risk landscape, parametric cover is becoming a more common risk transfer solution. As cyclone activity extends further south, climate risk modelling — assessing exposure by frequency, peril and location — can help New Zealand organisations determine which risk management options make sense for their operation and the exposure they are dealing with.
A Better Understanding of Risks Informs Better Decisions
FAB businesses can better navigate an evolving risk environment when they have a clear view of where exposure sits across their whole operation and where their current program provides genuine protection. The goal of risk consulting is to ensure that key risks are understood, and to support a business in the informed and intentional management of that risk proportionate to the potential impact.
A risk review with experts in the sector — drawing on risk engineering knowledge and deep claims experience — can help FAB businesses take a realistic and forward-looking view of risk management and insurance and determine which solutions can prepare their business for risks and perils as they evolve.
Talk to Aon today for tailored advice and solutions to protect your business against emerging risks in the food, agribusiness and beverage sector.
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