Recalls rise sharply in Asia

Products from Asia continue to account for a disproportionate number of recalls in the US and Europe, reflecting the eastwards shift in global supply chains and historically weaker quality controls in some countries.

According to new research from Allianz Global Corporate & Specialty (AGCS), Chinese products accounted for over three times as many recall cases in the US as US products in 2015. Across Asia, product safety regulation is improving, while consumer awareness is growing, leading to more government-led recalls.

Government-led recalls are becoming more common – particularly in China. Recall numbers are also on the rise elsewhere, with AGCS research showing Singapore and the Philippines were among those seeing increased activity.

Asia is still a relatively small market for product recall insurance, compared with North America and Europe. But while Asian companies once only purchased product recall insurance for exports to the US and Europe – especially in the automotive sector – many are now starting to buy cover for their home markets, where product safety regulation and consumer expectations are rising.

“There is a clear link between product recall claims and the shift in manufacturing to Asia and China. Product quality management levels in Asia are improving but they are not yet up with the levels seen in the US and Europe,” says Christof Bentele, head of Global Crisis Management, AGCS.

“More and more Asian companies realise that buying product recall insurance makes sense, even when they only operate domestically,” says AGCS’ Bentele. “It is hard for any company to survive in a market with a bad or faulty product. That is as true for Asia as anywhere else.”

According to the US-China Economic and Security Review Commission, Chinese goods accounted for 23% of all goods in the US in 2014 but represented 51% of all product safety recalls. Meanwhile, China’s share of US toy recalls rose from 10% in 1988 to 98% in 2007.

In 2015 China accounted for 2,124 product recall cases in the US, compared with 685 from US companies, says the Consumer Product Safety Commission. The country also accounted for 62% of the product safety alerts issued by the European Union in 2015.