US manufacturers hit by soaring property insurance costs

New York (Reuters): James Kirsh expects the cost of the property and casualty insurance for his family-owned foundry in Wisconsin that makes cast iron parts for tractors and other equipment to at least double when it's up for renewal this fall.

He’s been told it could triple.

The problem is that his long-time insurer - Acuity - has told his insurance agent it no longer wants to cover factories like his, which handles molten metal. So they'll need to piece together coverage from multiple, higher-cost alternative providers.

"It’s a mess for the whole industry," said Kirsh, the company’s president.

A spokesperson for Acuity declined to respond to questions about its plans to stop providing insurance to the foundry industry.

The cost of insuring everything from homes to cars in the U.S. has surged in recent years, driven by factors including rising costs of car and home repairs and more storm damage amid climate change. Auto insurance, for instance, has seen its biggest increases since the 1970s over the past year - and is even cited by economists as an outsized factor in the inflationary wave the Federal Reserve has fought to tame with interest rate hikes beginning in March 2022.

So it's no huge surprise that factories are getting hit.

Many manufacturers handle dangerous materials and operate heavy machinery that can cause accidents and fires, which has always meant paying hefty premiums. This is especially true for smaller manufacturers, who are generally viewed as posing more risks by insurers.

Big companies have internal risk managers who assess potential dangers and bigger budgets to spend on safety measures like sprinkler systems or fireproof rooms that can minimize insurance claims.

Insurance coverage for all types of businesses - it isn’t broken out for manufacturing alone - has risen by around 12% since the beginning of 2022, according to the Bureau of Labor Statistics, nearly three times the increase over comparable time spans during the decade before the pandemic.

It’s the scope of the recent increases that has shocked foundries and other metalcasters, a $50 billion industry that produces parts for everything from appliances to bulldozers.