Biotechnology (biotech) is part of the life sciences sector and involves using parts of living organisms to make products for industries including pharmaceuticals, agriculture and energy. One recent industry report placed Australia second in the world for productivity in the biotech sector. Some insurance stakeholders see biotech as a growing area of opportunity for brokers. However, the challenges for a broker include heavy regulations and the need for in-depth specialist knowledge.
“We typically work with early-stage businesses developing medical devices or drug therapies,” said Brad Tresidder (pictured), executive chairman and founder of Tresidder Insurance Brokers.
Tresidder said his Melbourne-based firm has “a real focus” on biotech and life sciences. He sketched some of the ways brokers are involved in the sector.
“These ventures often spin out of universities and are backed by research grants or seed capital,” said Tresidder. “That’s usually where we get involved - sometimes directly through venture capital firms, other times through research institutions.”
He said as the technology matures, these businesses stage clinical trials and raise further capital.
“Our role is to evolve the risk strategy alongside them, ensuring they’re protected at every stage of growth,” said Tresidder.
However, regulations, he suggested, can be a major challenge.
“It’s a highly regulated and nuanced space,” he said. “Once you move into human trials, for example, there’s no room for error.”
He said any broker involved would need to understand the clinical risks, the ethics approval process, patient criteria and informed consent requirements.
“Of course, you also need to know about the specific risk profile of the underlying tech,” said Tresidder.
If a biotech offering hopes to reach global markets, there are also Phase 3 clinical trials.
“This adds another layer of complexity - cross-border regulation, governance structures and the operational risks that come with scaling up,” he said. “You really have to know what you’re doing in this space.”
Then, after country approval, it can be Phase 4 studies, says the WHO website, if there is a need for further testing on a wider population over a longer timeframe.
The broker said another challenge can be insurers who don’t fully understand the biotech model or are restricted from underwriting certain elements.
The insurance restrictions, he said, can particularly apply to directors and officers covers (D&O).
“Add to that the need for capital raising, IPO cover, trial-specific insurance, and international board structures,” said Tresidder. “You’ve got a very specialised risk environment.”
He suggested that part of excitement of the broker’s role is being involved in the creation of technologies that have no precedent – but this can make the underwriting difficult.
“That’s where we [specialist brokers] step in - to bridge the gap between innovation and protection,” said Tresidder.
The broker said insurance capacity and availability for biotech businesses is improving.
“We’re seeing more capacity come back into the market, particularly around D&O and warranties and indemnities,” said Tresidder. “Things have softened a little and I think we’ll continue to see that trend for the time being.”
However, he said even with more options available, the challenge of “crafting the right kind of cover” remains.
In an earlier interview with Insurance Business, Geoff Stooke, another broker in the biotech space, also emphasized this coverage challenge and others.
Australia’s Biotechnology Sector Snapshot 2022 attributed the growth to increased domestic and global vaccine production capacity and more capabilities in the production of medical products and technologies.
Earlier this month, Arthur J. Gallagher & Co. acquired Tresidder Insurance Brokers. Sarah Lyons, Gallagher Australia’s CEO, said the brokerage team “has deep expertise,” particularly across industries including agriculture and manufacturing.
Are you a broker involved in the life sciences or biotech space? Please tell us about some of your projects and insurance challenges below.
