AIG launches service to estimate cost of product recalls, manage risk

American International Group (AIG) is looking to address the growing financial impact and frequency of product recalls for food and beverage manufacturers, distributors and importers in the United States and Europe with the launch of a free, web-based service.

NOVI – designed to help food and beverage manufacturers make more informed decisions about how to manage their risk – provides these companies an estimate of their probable maximum recall loss in the event of an accidental contamination, notes a statement issued Tuesday by AIG, an international insurance organization serving customers in more than 130 countries.

The aforementioned estimate uses more than 80 data points and a proprietary methodology based on AIG’s experience providing contaminated product insurance, extensive analysis of thousands of recall incidents, and input from a leading food safety consultant, NSF International.

The confidential service is available in six languages to qualified food and beverage manufacturers in the U.S., United Kingdom, Germany, Austria, Belgium, Canada, Denmark, Italy, Netherlands, Spain and Switzerland.

AIG notes that product contamination requiring a recall can involve expenses such as replacement and destruction costs, lost profit from plant shutdowns, government intervention and brand damage.

On average, 30 class I and II product recalls occur every week in the food and beverage industry in the U.S., and another 22 equivalent recalls are reported in Europe, indicates AIG analysis of data from the U.S. Department of Agriculture and the European Union Rapid Alert System for Food and Feed.

Food and beverage companies “are generally aware of the frequency of product recalls,” Nicky Alexandru, vice president for crisis management, global casualty at AIG Property Casualty, says in the statement. “However, they are unsure of the potential magnitude of financial impact from a recall event,” Alexandru adds.

AIG also announced Tuesday that it had expanded its available accidental contamination coverage limits to $35 million.