Current life sciences insurance trends and the imperative for specialised coverage

The life sciences industry, valued at $412.74 billion in 2023 and projected to reach $727.1 billion by 2025, faces unprecedented complexity.

Critical risks

Life sciences organisations face interconnected challenges: supply chain failures, regulatory uncertainty, cyber attacks, product liability, and major projects. These risks demand specialised insurance solutions, that standard policies cannot address.

Six trends requiring specialist coverage

1. Regulatory complexity

Resource constraints and divergent global frameworks extend approval timelines, requiring policies that cover regulatory delays and framework changes, in many cases across multiple jurisdictions.

2. Supply chain vulnerabilities

Many life sciences businesses are subject to single-source dependencies (particularly Active Pharmaceutical Ingredients from China and India). These are the biologically active components in a drug, often with long (five plus years) diversification timelines that necessitate specialised contingent business interruption and parametric coverage.

3. Clinical trials

Companies need protection for both negligent and non-negligent participant harm.

4. AI integration

Machine learning in medical devices can create liability from malfunctions, diagnostic errors, ‘hallucinations’ and algorithmic bias. Some life sciences products have been extended to cover performance warranties, discrimination claims and regulatory fines.

5. Personalised medicine

Gene-editing technologies like CRISPR raise product liability concerns around unintended genetic changes and long-term effects, requiring underwriting for novel therapies with limited historical data.

6. Emerging therapies

GLP-1 medications (medications that mimic the GLP-1 hormone to help control blood sugar for people with type 2 diabetes and aid weight loss – an example is Ozempic) and similar innovations require careful balancing of potential against risks and side effects.

Why standard policies fail

Stage-specific risks

Companies need different coverage at each development stage – from research and development (spoilage, data protection, IP) through clinical trials (participant liability) to commercialisation (product liability, recall).

Unique exposures

Research and development companies often operate at a loss, making traditional net profit-based business interruption policies ineffective. They need coverage for lost research and development time, temperature-sensitive materials, global product transit and other specialist needs.

Complex relationships

Simultaneous proprietary development and contract manufacturing requires tailored professional liability coverage. Companies might engage in their own product development and manufacturing services whilst simultaneously offering manufacturing capabilities and expertise to external clients. 

Social inflation (the rise in insurance claim costs outpacing general economic inflation) 

Escalating social inflation may require higher limits and sophisticated severity modelling.

What this means for insurers

Standard insurance is fundamentally inadequate for life sciences. Success requires deep sector expertise, specialised products that evolve with clients and alternative risk transfer mechanisms. Specialised policies aren’t a preference – they’re an operational necessity driven by the unique, evolving and interconnected risks in this sector.