Everyone expected the recall market to explode - and yet, it hasn’t.
Years of supply chain shocks, regulatory shifts, and rising brand risks led many to believe that recall insurance - especially for small and midsize manufacturers - was poised for a breakout. But Robert Balogh (pictured), executive vice president at Amwins, said the wave still hasn’t hit. “It really hasn't yet,” he said. “That's not to say it won't, but it's still early, I think, is the reality.”
The disconnect, Balogh said, lies in the lack of retailer mandates. For over a decade, the industry has anticipated a trickle-down effect from giants like Walmart and Costco. But without contractual enforcement, most smaller businesses see recall coverage as optional.
Balogh, who specializes in product recall risk, sees growing pressure on companies that scale quickly through outsourced manufacturing - particularly in consumables and direct-to-consumer goods. But even as applications get easier and underwriting becomes more competitive, widespread adoption may remain elusive until structural forces shift.
At the heart of the sluggish movement is the ongoing flexibility among major retailers. Balogh observed that while the industry has long expected change, it hasn't materialized.
“We've all been waiting for about a decade for that to happen, and it still hasn't,” he said, referring to a hoped-for industry-wide mandate around recall insurance.
Large players like Costco, Sam’s Club, and Walmart continue to push contractual obligations - but not with enough force to drive broad adoption downstream. “Until it's a mandate by the large retailers, it's not going to make its way downstream to everybody else,” he said.
Even without a systemic push, product recall insurance is evolving, especially in fast-growing sectors like food production, cosmetics, and direct-to-consumer manufacturing.
“We're seeing a lot more companies go from traditional manufacturing to a company of 50 employees. They have a concept and a brand, and they're outsourced to manufacturing.” That quick scalability, however, comes with heightened risk.
Barriers to securing recall insurance have traditionally centered on a complex application process and a fundamental misunderstanding of what recall insurance covers.
“I think in the last two to three years as an industry, we've removed a lot of those barriers in that trade,” Balogh said, noting that streamlined applications and increased carrier competition have made policies far more accessible and affordable.
“2024 was not a great year for recalls,” Balogh said, emphasizing that last year likely represented the largest volume of recalls the industry had ever seen.
Yet despite this surge, no single industry appears solely responsible. “It's really anything consumable, topical or adjustable,” he said, attributing some of the chaos to governmental backlogs.
“To get a formal response to the FDA could take historically, could take 30 days. It could be 90, 120 days now,” he said. This slow response time is particularly damaging for companies trying to act responsibly.
“These companies are doing what's required from a legal standpoint and regulatory standpoint, but they're being told to wait forever to get a response,” Balogh said.
Balogh cited chronic underfunding and restructuring within the FDA and USDA as key culprits for these bottlenecks. As a result, businesses navigating a recall must often act without timely guidance, an added layer of uncertainty in an already high-stakes environment.
When asked whether contamination and defective events have become more complex in the era of hyper-connectivity and reputational risk, Balogh countered prevailing narratives.
“I honestly think they become much more simplified,” he said. Increased access to data has given underwriters and insurers sharper tools to understand risk.
“Ten years ago, the average loss, most would tell you, was around $800,000. Fast forward to today the average loss is around $2 million ground up.” That escalation in claim size has changed the market dynamic, making insurers far more cautious.
“We’re seeing more insurers using shorter lines and quota share structures to better manage their capacity deployment,” Balogh said.
Yet despite rising claim costs, Balogh remained skeptical about the long-term impact of reputational damage. While it's often cited as a key concern in recall scenarios, he said the actual fallout rarely lives up to the fear.
“If you ask most insurers what the reputational risk or impact is on a company after a recall, most wouldn't know,” Balogh said. “The reality is most consumers have short memories. While we think it’s a huge reputational effect, it doesn’t always play out that way.”
