Amid growing product recall risks, a 5-in-1 insurance solution has been developed for Asian automotive manufacturers
Vehicle recalls have been rising globally in recent years, with a large proportion of these coming from Asia. The primary drivers are due to the increased usage of common components across models, rapid shifts in vehicle technology and increasing regulatory pressures around safety requirements.
Some product defect risk can be mitigated using technology during the production, but errors can still affect global product manufacturers and automotive brands. As a result, automotive manufacturers are faced with an increasing occurrence and severity of losses in today’s global marketplace.
“Liability losses and vehicle recalls can have a significant effect on a company’s balance sheet, causing a cash shortage that can eliminate profits. Not only can it result in financial losses, it can also affect a company’s shareholders value, the brand and reputation of the company.”
“Whether the cost is incurred by the automotive manufacturer or a third-party such as a direct customer of the vehicle, the costs to cover labour, transportation and disposal due to a product recall can be expensive,” said Barbara Fabbri, head of casualty, Asia, Willis Towers Watson.
Automotive companies across Europe and the US usually require product recall coverage of between $5 million to $10 million. However, manufacturers in Asia typically look to liability insurance with a recall extension of $2.5 million covering third-party expenses, which does not provide complete or adequate cover.
In response, Willis Towers Watson has launched a 5-in-1 insurance solution, developed in partnership with Swiss Re Corporate Solutions.
It is an enhanced casualty solution for automotive manufacturers in Asia and covers most, if not the entire liability exposure of automotive manufacturers, from general liability, product liability to product guarantee, product recall from first and third-party, and financial loss relating to product recalls.
“Whilst standalone solutions may be suitable for clients with more complex risk exposure, the cost may be prohibitive to many of the small and medium-sized businesses in Asia. Taking into consideration the specific risk exposures faced by Asian automotive manufacturers and what their clients often contractually require from them, we are introducing a combined solution to cover the entire liability exposure, avoiding coverage gaps in the Asian liability and recall insurance market today,” added Fabbri.
The product is designed for manufactures of automotive electronics or mechanical components headquartered or with operations in Asia and exporting worldwide.