The cost, availability and purpose of product recall insurance is increasingly misunderstood by food and drink businesses, according to insurance broker Jardine Lloyd Thompson (JLT).

The broker believes that food, drink and ingredient manufacturers and processors should have a “clear understanding” of their vulnerability to product recall situations.

Ian Edwards, of JLT’s Food and Drink Practice, said: “It is crucial for businesses to have a very strong understanding of all component parts of their supply chain, and particularly the insurance arrangements of their suppliers.

“Your broker should have sufficient experience to assist with this process and discuss the options available to you to transfer some of these risks to the insurance market.”

Edwards added that product recall cover is not as high as many might have mistakenly been advised.

The broker said that a real-life product recall situation can prove “very costly”, as witnessed by the recent high-profile Irish pork recall, where supermarkets had to take the meat off the shelves after pig feed was contaminated with potentially harmful dioxins.

“Contract negotiations will increasingly question if product recall insurance is in place but many businesses choose to simply take the risk on the chin.

“Cover will fund crisis containment and public relations experts to help you to efficiently manage the recall and rehabilitate your products against any negative publicity that might follow,” Edwards added.