Using the exogenous impact of China’s food safety compulsory liability insurance system, this paper empirically explores the impact of the implementation of compulsory liability insurance system on the risk of stock price collapse. It is found that based on the regulatory effect of insurance institutions, the implementation of compulsory liability insurance system can significantly reduce the stock price collapse risk of food listed companies by strengthening the supervision of food production and reducing the fluctuation of operating performance. Moreover, the policy effect is more significant in non-state-owned listed companies, listed companies with less shares held by institutional investors and listed companies with serious information asymmetry. Overall, this study presents that the joint supervision mechanism formed by the public and private sectors can effectively strengthen food safety supervision.