James Kirsh expects the cost of property insurance for his family-owned Wisconsin foundry, which makes cast iron parts for tractors and other equipment, to at least double when the insurance comes up for renewal this fall.
He was told he could triple that.
The problem is that his longtime insurer — Acuity — told his insurance agent it no longer wanted to cover plants like his that handle molten metal. He will therefore have to find cover with several other insurance companies whose costs are higher.
“It’s a real waste for the whole industry,” said Mr. Kirsh, the company’s president.
A spokesman for Acuity declined to answer questions about whether it plans to stop providing insurance to the foundry industry.
In the United States, the cost of insuring everything from homes to cars has risen in recent years, due to factors such as rising auto and home repair costs and increased damage caused by climate change-related storms. Auto insurance, for example, saw its biggest increase last year since the 1970s. It is even cited by economists as a major factor in the inflation wave that the Federal Reserve has been working to stem in raising its interest rates from March 2022.
It is therefore not surprising that factories are affected.
Many manufacturers handle hazardous materials and use heavy machinery that can cause accidents and fires, which has historically meant paying high premiums. This is especially true for smaller producers, who are generally considered more risky by insurance companies.
Larger companies have in-house risk managers who assess potential hazards and larger budgets to spend on safety measures such as sprinkler systems or fireproof rooms, which can minimize claims.
According to the Bureau of Labor Statistics, insurance coverage for all types of businesses — it’s not broken down for just the manufacturing sector — has increased by about 12% since the start of 2022, or nearly three times the increase recorded over comparable periods in the decade before the pandemic.
It’s the scale of the recent increases that has shocked foundries and other metal casters, a $50 billion industry that makes parts for everything from appliances to bulldozers.
“Not long ago, health insurance exploded,” said Doug Kurkul, executive director of the American Foundry Society. “Today it is overshadowed by property and casualty insurance.
‘LOOKING GOOD’
Overall, commercial rates for all types of business insurance increased in the second quarter of 2024, increasing by about 10% in some regions, said Loretta Worters of the Insurance Information Institute.
Worters said the tariff hike is part of a larger wave of inflation roiling the U.S. economy. “If you have an explosion on your property and it has to be rebuilt, the cost of rebuilding is much higher than it was five years ago,” she said.
Bad weather is another factor. “If you see an increase in the number of hurricanes damaging manufacturing facilities — and you’re constantly seeing losses — then you can go to the state regulator and say they need to raise rates for the manufacturing industry,” Worters said.
Kate Hensley, an insurance broker in Dubuque, Iowa, who specializes in working with foundry companies, said, “Any business that has a high potential for total loss is looked at closely by insurance companies.”
Hensley says the problem is particularly acute in an industry like foundries that face obvious fire risks, but it’s not limited to that. “Other industries, such as chemicals and plastics, pose high risks.
Large insurers that have long covered these types of businesses are sometimes pulling out altogether, Hensley said, reducing the number of large insurers and leaving manufacturers with fewer options. “This is happening more and more often,” she said. They say that no matter how many safeguards are in place and how good they are, they say, “We’re not going to take care of them.”
Other types of producers keep their insurance companies but pay much higher rates. Gent Machine Co in Cleveland paid $30,785 to insure its small precision machining business in 2019. Premiums have increased every year since, including nearly 28% between 2022 and this year.
“We went back to our agent and asked him to give us a quote — and he said all the other insurance companies” were quoting much higher rates, said Rich Gent, the company’s vice president. “The feedback I’ve had is that our current insurer knows we have a good deal – that’s why they’re raising the price, because what would you do, you wouldn’t be insured?
At Kirsh Foundry, based in Beaver Dam, Wis., the question now is how much of the higher insurance bill it can pass on to customers. The company is busy reducing prices, not passing on further increases, Mr. Kirsh said. One option he is considering is to reduce the amount of coverage, since the risk of destroying the entire facility is low.
He explains that his customers “understand when I tell them I have to cover materials, labor or benefits. But that’s something that becomes difficult to discuss with our customers.
