‘Broad-brush’ from insurers leaves food producers uncovered in Spain

Spanish food producers are struggling to purchase property insurance for buildings that use so-called ‘sandwich panels’, as underwriters fail to differentiate between the riskiest and safest materials, brokers told Commercial Risk Europe.

Sandwich panels are a kind of insulated wall partition widely use in Spain because they are cheap to use and provide good thermal insulation, which is vital in a country where companies face extreme hot and cold weather. They are often used in buildings owned by food companies.

Sandwich panels also offer good resistance to fire but with a catch – if they do catch fire, it is very difficult to put out.

“When there is a loss, it tends not to be a small one. We are talking about millions of euros,” said Agustín Espinosa de los Monteros, the chief broking officer for commercial risk in Spain at Aon. “During the soft market, everybody promised to do their part, but little was done, and then the losses came.”

Sources noted that there is at least one big fire linked to sandwich panels reported every year in Spain. As a result, since the end of the soft insurance market, food producers are among the sectors most affected by the withdrawal of capacity from Spanish insurers for this risk.

But Espinosa de los Monteros said that insurers are currently applying a “broad-brush” approach to the industry, even though the technology for sandwich panels has improved quite significantly in recent years. Some of the products now available in the market are less prone to producing inextinguishable fires than before, he added.

“There are different kinds of sandwich panels. The industry has evolved,” he said. “One of the world’s main producers is our client, and we are organising sessions with the market to explain the difference between the varied kinds of panels.”

Espinosa de los Monteros added that there also is a push in Spain to learn from the experience of other markets where sandwich panels are widely used but buyers face less rejection from underwriters, such as Ireland.

He added that the situation is hard for clients to understand in Spain because insurers were way less picky before the hard market started five years ago. Insurance buyers also point out that the panels used in their plants are in line with the regulatory requirements imposed by the Spanish government.

“Clients often claim that they meet all regulations, but doing enough for insurers to want their risks is a different matter,” said Espinosa de los Monteros.

Brokers say that companies need to make big investments in fire prevention upgrades to obtain property cover for sandwich panels in Spain. This is a big challenge for a sector where more than 95% of businesses are believed to be SMEs.

Even then, there is no guarantee that buyers will find the covers they need, and much less that they will fit within their insurance budgets. The fact that many food production plants are decades old and family owned, and owners sometimes don’t even know which sort of insulated panels have been used, does not help the sector either.

The food industry is an important sector for the Spanish economy, amounting to 2.3% of its GDP and 18.5% of all its manufacturing production. Total production reached €162.4bn in 2023, 30% of which was exported to foreign markets, according to FIAB, a trade association.