3 big questions with life science expert - Travis McIntosh

The key challenges for product liability insurers can be summed up in three categories, exposure to a multiple injury event, inability to enforce indemnity on behalf of insured distributors and limit stacking.

Multiple injury event
Whilst some products are using established technology platforms, the RNA-based vaccines are completely new, and the compressed development timeline means there is an increased risk of unexpected side effects which haven’t shown up in testing.

The riskiest period for any new drug is the first five years post-approval. When we map that against the numbers who will be dosed in the next 12–18 months there is an elevated risk of a multiple injury event and subsequent class action activity.

Difficulty providing indemnification
For some of the companies developing these technologies, this will be their first product to market. Consequently, there is a solvency risk which will drive them to seek higher than normal insurance limits, and, could make providing indemnification to distributors difficult once those limits are used up.

Limit accumulation
The risk of limit accumulation affects not just the original manufacturers, but also all the companies distributing on behalf of those manufacturers. All insurers looking to support companies within this ecosystem for product liability insurance will need to be cautious with deploying their finite capacity to mitigate this risk.

With Life science firms embracing and investing in new technologies to drive automation, efficiency and connectivity in both R&D and production, the benefits gained could be lost if not managed properly against the cyber risks that can disrupt these new dependencies. Even before the pandemic, cybersecurity was one of the top risk-management priorities for the industry. In fact, when Chubb in the United States surveyed a panel of middle-market Life Science firms in late 2019, 52% of respondents said they had experienced a cybersecurity breach. We observe a similar trend in the Asia Pacific, which suggests the prevalence of cyber threats across the globe.

With the onset of the pandemic, Intellectual Property which holds the potential cure for COVID becomes extremely valuable, and quickly became a prime target of both cyber terrorists and some governments. At a panel discussion we hosted at the Ausbiotech conference in Melbourne last year, a cyber security firm representative noted that the company had seen an increased number of attacks being levelled against companies operating in the Life Science sector.

With these developments in mind, having robust systems in place to protect IT networks and data from cyber threats has become more important than ever.

Life science supply chains are among the most complex in the world so they’re susceptible to COVID-related disruption. The pandemic has impacted supply chains globally, and weak links are being uncovered quickly.

Production delays present many potential risks and liabilities to Life Science companies. To minimise exposure, they need to thoroughly validate potential supplier partners to ensure they will be able to cope with any contingencies that arise.

Recovery from any disruption hinges on effective planning, education and execution. In addition to having their own Business Continuity Plan, companies should not only diligently put that plan to test (which they probably had ample opportunity to do last year!), but also run mock disruption events annually.