| Trend | Range | |
|---|---|---|
| Life sciences |  |
+5% to +10%; possibly more for clients with unfavorable losses or product classes in active litigation |
Key takeaway
In the short term, insureds should expect mid-single-digit rate increases; in the longer term, the risk landscape for the industry is likely to evolve as courts reopen, and opioid cases result in more insurance carrier payouts.
Capacity
- For most domestic clients who purchase up to $100 million in limits, there is adequate capacity in the U.S.
- The global product liability capacity for life sciences is roughly half the size it was 10 years ago, with the market contraction most pronounced in Europe.
- Roughly half of the current capacity worldwide is in the U.S., supported by a handful of insurers in the U.K. and Bermuda.
Claims and litigation
- Pharmaceuticals and medical devices continue to be targets for product liability lawsuits, with social inflation leading to larger settlements, bigger jury awards, and defense expenses continuing to trend upward. For these reasons, higher limits should be considered.
- Third-party litigation funding is a multi-billion-dollar industry that is reshaping litigation on a global scale.
- Coverage considerations
- Connected medical devices require thoughtful program design to adequately address product, professional and cyber liability exposures.
- Coverage for product withdrawal expenses within the product liability form is very limited; those with a recall exposure should explore stand-alone product recall coverage, as recalls continue to be on the rise.
- Early M&A due diligence is critical with respect to past liabilities and retroactive dates.
Risk positioning
- Demonstrating appropriate safety and quality measures, along with adequate contractual risk transfer and indemnification with third parties, is key to gaining favorable market opinion and securing the most competitive terms available.
- Food and Drug Administration (FDA) enforcement and inspections are expected to ramp up again in 2022; underwriters will be looking for timely, amenable responses to any observations or corrective actions.
- Detailed information on new or discontinued products and past recall activity is required for a successful negotiation.
Pricing
- Insurers are seeking 5% to 10% rate increases for most risks with favorable loss history and quality controls — possibly more for those unable to demonstrate quality and safety standards or with unfavorable losses.
- Litigated or challenged product classes (i.e., orthopedic implants, IVC filters, opioids, birth control, nutraceuticals, etc.) continue to face more scrutiny.
Emerging issues
- COVID turned a spotlight on the pharmaceutical industry, with uncertain long-term consequences.
- The FDA is developing a plan to transition away from temporary COVID enforcement policies and emergency use authorizations (EUAs) to return to normal premarket processes.
- Pending legislation for new regulation of LDTs (laboratory developed tests) and other clinical testing is a result of the attention COVID has drawn to such testing.
- Several other developments and issues are likely to change the risk landscape for life sciences:
- Evolution of gene and cell-based therapies
- Decentralization of clinical trials to fully virtual or hybrid models
- Product contamination during manufacturing; impurities from sourcing of raw materials
- Regulation around CBD products; market appetite still very limited
