James Kirsh, president of a family-owned foundry in Wisconsin, is bracing for a significant spike in property and casualty insurance costs for his business. As his current insurer, Acuity, withdraws from covering factories like his, which deal with molten metal, Kirsh faces the challenge of piecing together more expensive coverage from multiple providers. “It’s a mess for the whole industry,” Kirsh remarked.

The surge in insurance costs is not unique to Kirsh’s foundry. Across the U.S., the cost of insuring everything from homes to vehicles has been rising due to factors like increased repair costs and climate change-related damages. Auto insurance, for example, has seen its steepest increases since the 1970s, contributing to the inflationary pressures that the Federal Reserve has been battling.

Manufacturers, particularly those handling hazardous materials or operating heavy machinery, have long faced high insurance premiums. However, smaller manufacturers, viewed as higher risk by insurers, are now feeling the pinch more than ever. Larger companies often have the resources to mitigate risks through safety measures, but smaller operations like Kirsh’s are left vulnerable to escalating costs.

The situation is especially dire for foundries and other metalcasters, a $50 billion industry that produces essential components for various products. “It wasn’t long ago that health insurance went through the roof,” said Doug Kurkul, CEO of the American Foundry Society. “But now that’s been eclipsed by property and casualty insurance.”

Since early 2022, commercial insurance rates have risen around 12%, nearly triple the rate of increase seen in the decade before the pandemic. In some regions, rates have spiked as much as 10% in the second quarter of 2024 alone, according to Loretta Worters of the Insurance Information Institute. Rising construction costs, inflation, and severe weather are among the key drivers of these increases.

Insurance broker Kate Hensley, who specializes in metalcasting companies, noted that industries with high risks of total loss, such as foundries, chemicals, and plastics, are facing intense scrutiny from insurers. Many large insurers have pulled out entirely, leaving fewer options for manufacturers. “They say it doesn’t matter how many safety provisions are put in place, how good they are – they say, ‘We won’t handle them,'” Hensley explained.

Other manufacturers, like Gent Machine Co. in Cleveland, have managed to keep their insurers but at significantly higher costs. The company has seen its insurance premiums jump by nearly 28% between 2022 and 2023. “The feedback I got was that our current carrier knows we have a good deal – that’s why they’re raising the price, because what are you going to do, go uninsured?” said Rich Gent, the company’s vice president.

At Kirsh Foundry in Beaver Dam, Wisconsin, the challenge now is determining how much of the increased insurance cost can be passed on to customers. With pressure to keep prices down, Kirsh is considering reducing coverage, as the likelihood of a total factory loss is minimal. “This is something that’s going to be a hard conversation with our customers,” he acknowledged.

(Adapted from USAToday.com)