Insurance Implications of Brexit-inspired Stockpiling Should Cause Concern
An eleventh-hour Brexit trade deal did not come in time to prevent some British companies stockpiling all manner of goods, to safeguard against supply chain issues, tariffs and price rises. But in some cases, unless limits have been increased, some companies will have insufficient insurance coverage to protect the greater amount of stock held. This will put some stockpilers at risk of negative financial impacts, should a total or partial loss occur.
Stock held in warehouses, or in transit in the supply chain, has been becoming increasingly attractive and thieves in the UK have been actively targeting it. Half of all thefts from supply chains in Europe, the Middle East and Africa, in the first half of 2020, occurred in the UK.
Crime, such as the October 2020 theft of three lorries laden with alcohol from a warehouse in Cheshire, is not uncommon but other attractive items – including PPE and Covid-related items – are also on the radar of gangs worldwide.
The retail sector has been open about its pre-Brexit stockpiling and supermarkets were actively encouraged to stockpile, to protect the UK supply chain and prevent shortages of some items. Long-life products and Italian beers are just two items said to have been stockpiled, whilst a specialist whisky producer has admitted to stockpiling glass bottles from France, to keep production flowing.
Helen Dickinson, chief executive of the British Retail Consortium (BRC) commented, before the trade deal, that, “Retailers are doing everything they can to be prepared for all eventualities on 1st of January, increasing the stock of tins, toilet rolls and other longer life products, so there will be sufficient supply of essential products.”
The signs of widescale stockpiling have been witnessed in Stena Lines experiencing its busiest three weeks on record on the Dublin to Holyhead route. Manufacturing also achieved a 35-month high in November 2020. Whilst the Chartered Institute of Procurement and Supply does not expect this to continue in 2021 as the basis of any longer-term sustainable recovery, it will take some time for stock levels to run down to normal levels.
Companies that are holding more stock than normal, should examine their policy small print and assess to what limit they are covered for losses. Should a fire or theft occur, a major loss could result. If the policyholder was under-insured, the insurer could legally decline the claim, on the basis that the material facts provided were inaccurate, or apply what is known as the insurance law of ‘average’ to the loss. This could lead, in some cases, to the insured having to suffer a significant financial impact.
It is the insured’s responsibility to calculate the value of their stock and advise of adjustments and, even if there is flexibility in a policy for a seasonal peak, it may well be that Brexit stockpiling has exceeded that.
Ensuring that stock is adequately protected, not just in a warehouse, but also when on the road, or on a ship or plane, is also key and companies should talk to their insurance broker, to assess whether they require goods-in-transit cover or other types of protection.
Checking that there is robust employee liability protection in place, to safeguard against any incidents caused by additional stockholding – is also advisable. Should a greater volume of stock have impacted on practices and procedures, in any way, a new risk assessment will be required, updating previous measures required to keep everyone safe.
To find an insurance broker who can help with the insurance requirements for your stock and goods in transit, please get in touch.
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