Any company involved in food production saw its Product Recallrisk greatly magnified last year with the enactment of the U.S.Food Safety Modernization Act (FSMA), says Louis Lubrano, NewYork-based senior vice president of global crisis management forLiberty International Underwriters (LIU).

Under FSMA, the federalgovernment for the first time is empowered to order recalls of foodproducts even when authorities only suspect a problem with aproduct but have no hard evidence, Lubrano says.

“That's a game-changer,” he observes. “The issue is stillevolving on what could trigger a recall,” Lubrano says, but fornow, “it's what the government believes” rather than what it knowsis a risk.

The law stems, in part, from a series of recalls of variousproducts since the mid-2000s. Some of the recalls involved eggs,peanuts, milk and dog food. The 2009 peanut recall alone affected2,000 companies that used salmonella-contaminated peanuts from asingle processing plant in Georgia.

Before FSMA was enacted, the vast majority of food processorsdid not purchase Product Recall coverage, Lubrano notes. For manycompanies with tight insurance budgets, the coverage was toopricey.

In addition, the coverage responded only when the contaminatedfood product either had already made a consumer ill or evidenceshowed that its consumption likely would cause illness. Under FSMA,the U.S. Food and Drug Administration does not have to wait forthose developments to order a recall.

Insurers have responded by offering an endorsement, foradditional premium, that will cover the cost of FSMA recalls, hesays.

As a result, Lubrano says, the number of submissions for ProductRecall coverage at LIU “has been spiking ever since [this law] waspassed.”

LIU can offer up to $15 million of limits on a primary or excessbasis, and Lubrano says he has seen buyers build programs with upto $70 million of limits.

Exclusions vary by industry and client, but every policycontains an absolute lead exclusion, he says.

Despite buyers' growing interest in the coverage, “there arestill a lot of companies that don't buy this but need to andshould,” adds Lubrano. He notes that while the largest brokersproduce most of LIU's Product Recall business, between 70 and 80smaller producers each have brought LIU one or twopolicyholders.