By: Anthony Clark & Hamish Champ
May 8, 2014
The rising cost of insurance is the “most dangerous issue” facing plastics recyclers in the United Kingdom in the wake of high profile fires, according to Ben Gerry, general manager of Boomerang Plastics.
“We won't quote exact figures but our premium for next year has increased by around 2,000 percent,” he said. “The recycling industry has had an awful time in the press with all the fires but it is always important to understand the causes of fires — we were the victims of an arson attack and are being made to continue our suffering.”
He said his company, based in Tamworth, England, was not negligent, “but we are now paying the price of more 'generalization' in the industry.” Insurers assume all recyclers are the same — negligent and a bit 'tin pot', he said.
“Stipulations from insurers, if you can afford the insurance, are now ridiculous. Most will want storage of materials to be 10 meters from a building and 2 meters from a fence. Imagine what this does to available storage space.”
Mark Whitney, managing director of the CK Group whose CK Plastics Recycling is based in Market Rasen, England, said that recyclers had expected a rise in premiums due to the high number of well-publicized fires in recent months. “However, the magnitude of the increase was somewhat unexpected.
“I had hoped we could mitigate the cost by shopping around and demonstrating our good performance history, our clear risk management strategies and strict health and safety policies, but this proved not to be possible as there is only one [competitor] left in the market.”
One U.K. company, North West Electronic Recycling in Merseyside, had two fires within a year, A fire at Newgen Recycling, which recycles tires, in January reportedly was visible from space. And a May 7 fire at Thompson Waste in Scunthorpe had fire crews warning nearby residents to keep their windows closed to avoid potential toxic smoke.
Martin Marron, chief executive of Regain Polymers Ltd. of Castleford, said that like Whitney he had anticipated a rise in his firm’s insurance costs. But he said he was disappointed to see an increase of 20 to 25 percent, versus a ‘normal’ hike of between 10 and 15 percent, despite sticking to what insurers wanted.
Marron said when it came to things such as material storage, his company had the required controls in place, but this did not stop increases.
“Talking to some insurers it appears having the word ‘recycled’ or ‘recycler’ in your company literature now makes you too high a risk,” he added. “The number of insurers in the market is diminishing, with several insurers have simply stopped offering coverage altogether.”
Incease in number of fires
A spokesman for the Association of British Insurers (ABI) said his industry “is concerned at the apparent increasing number of fires at waste management and recycling centers. Insurers pay out over 1 billion pounds ($1.69 billion) a year in the U.K. to customers who suffer losses as a result of fire.
“In many cases the costs of these fires could be reduced, or in fact prevented altogether by effective fire protection or security measures. Insurers take into account a wide range of matters when pricing insurance and a sustained increase in the cost of fire is likely to have an impact for many businesses, including waste management facilities, particularly if insurers perceive those businesses to be at a high risk.”
Damien Hayes, managing director of U.K. retail at insurance broker Waste Insure, said premiums were increasing at a “realistic level” but fewer insurers were covering the recycling market for purely financial reasons: “It’s not about media coverage of recent fires or sector sentiment or anything like that. They are just not making any money.
“Claims don’t tend to be small, and a number of insurers have got burned and subsequently exited the market. Those that remain want to see a company that is an acceptable risk. If it is then it will get terms.”
Hayes said a plastics recycler could make itself more attractive to an insurer by spending money on what he called “risk mitigation techniques.
“Make your business as attractive a risk as possible. Insurers look for things like fire alarms, fire suppression systems, and so on. Yes, alarms and sprinkler systems cost money. But companies should see them as an investment.”
And if an insurer properly explained its requirements a recycler will be in a better position to understand why a premium costs what it does, he added.
Collective action required
Chris Dow, chief executive of Closed Loop Recycling — a Dagenham, England-based company that has stated its goal is to become the world’s largest recycler of milk jugs — believed that joint action was needed to stem the tide of premium price hikes.
“As an industry we need to deal with the issue of raised premiums collectively,” he said. “Firstly, we need to ensure all of the risks are understood and that the appropriate measures are taken to minimize then, whether that be putting new practices into action or installing upgraded technologies.
“Then, collectively as an industry, we need to be having the appropriate conversations with the insurance industry to instill confidence in the recycling sector to ensure appropriate levels of cover are available at a reasonable price.”