Life Sciences

Life Sciences: pharmaceuticals + medical products/medical technology

For life-science companies, premium increases have slowed down in most lines.

However, the hard market has not yet reached its peak. In recent months, the market has been affected by insurers’ concerns about the war in Ukraine, the Covid-19 crisis, inflationary pressures and the continuing flood of major claims. These events have led to single-digit premium increases in most lines, while reductions are still the exception. As a result of the conflict between Ukraine and Russia, insurers actively made use of restrictions already embedded in the wordings of their policies, such as war exclusion.

Effects of sanctions and risks in the supply chain are clearly impacting on insurance policies during the underwriting process. “Cyber” continued to prove the most challenging line, with both a further reduction in capacity and an increase in premiums and exclusions.

Market situation

The insurance market for life-science risks remains tense: premium levels, typically for this line already above average, are coming under further pressure, as illustrated by the red boxes in the chart below. However, the surcharges requested by the insurance industry are, in percentage terms, currently lower than those requested in previous years. Whether now, following years of significant premium increases (except for cyber policies), such trends towards stabilisation will become established, will largely depend on potential major claims over the course of the year as well as on the overall economic trend.

Key points from the liability line:

Overall (moderate)

Increased capacity requirements for medium-sized risks of medium to low complexity met with balanced market conditions. In terms of large and complex risks, the situation was more difficult, as insurers had become noticeably more cautious in their underwriting approach.

Pricing (+11-30%)

Prices continued to increase significantly in the first quarter, especially in the case of large and complex risks. Some insurers mentioned general inflation as the cause of these price increases.

Capacity (scarce)

Capacity remained largely stable and generally available for most risk types, although some insurers reduced risks and changed line sizes.

Underwriting (stringent)

Underwriting was generally stringent – but particularly so for poorly performing lines. Product recalls and product liability posed the greatest underwriting challenges. Insurers offered coverage for new liability business only if the risk type matched their strategy and risk appetite. High-quality underwriting information paid off for policyholders.

Sums insured (unchanged)

The sums insured could still be represented in full for most placements.

Deductibles (increasing)

New minimum deductibles were introduced as a requirement for insurance/renewal quotations. In some cases, however, policyholders opted for a higher deductible in return for a lower premium increase.

Policy content (stable)

Policy T&Cs were generally stable. Insurers have reviewed coverage for complex risks, however. As a result, some insurers have introduced cyber exclusion clauses into their policies.

Movements in insurance market, 2022

Life Sciences
Motor Liability Cyber D&O Property Credit
Total moderate moderate hardened hardened hardened hardened
Trend stagnant (+11-30%) (+11-30%) (+11-30%) (+1-10%) (+1-10%)
Capacity scarce scarce limited scarce scarce scarce
Under­writing flexible stringent stringent cautious stringent cautious
Sums insured unchanged unchanged declining unchanged unchanged unchanged
Deductibles increasing increasing increasing unchanged increasing increasing
Policy content stable stable restrictive stable stable stable
Source: Aon Q1 2022 Global Market Insights Report


We are expecting the current tough market conditions to continue for large and complex risks, with insurers’ assessments of coverage and capacity also unchanged. For medium-sized risks of moderate to low complexity, insurers’ willingness to provide cover is set to remain high as they are still seeking growth in this area. With geopolitical events causing risks in eastern Europe, however, underwriting scrutiny is expected to intensify.

Although there is robust corporate risk management and regulatory oversight in the Life Sciences line, risks to be insured in this line are seen by insurers as particularly exposed. As a result, these risks are often considered to be “hard risks” in the risk assessment process. In addition, the very wide range of risks could quickly lead to unjustified premium increases in this line. For example, a large volume of serious product liability claims and a high number of class actions – including associated D&O claims – have occurred within the Life Sciences line over the past 20 years. While these have decreased slightly over the past two years, 2022 reveals high exposure to business and supply chain disruptions. This trend is mostly due to shortfalls resulting from pandemic-induced recession, not to mention major cyber losses that have had a damaging impact on global supply chains.

When it comes to product liability, risks assessment is being further exacerbated as a result of continued stringent assessment processes by insurers, with issues relating to new risks being assessed more thoroughly than has previously been the case. Major challenges include opioids, gene therapy and products to counter rare or communicable diseases as well as products contaminated with nitrosamines. New, specialist insurers are entering the market, but their capacities are limited.

In the D&O line, insurers have now improved risk transparency in order to adapt in line with the requirements of life sciences companies. The premium adjustments of recent years have brought insurers back into a profitable position, while the number of lawsuits have declined for the second year in a row. This trend means the market can make better assessments overall. With more markets available, brokerage firms specialising in life sciences risks in particular can use competition to their policyholders’ advantage.

Market trends

To make better use of risk profiles, underwriters have integrated additional data into their underwriting process. At the same time, underwriters have invested in the development of alternative risk transfer solutions such as captive fronting and parametric solutions.

On 31 January 2022, after years of delay, the new EU regulation on Clinical Trials came into force. A harmonised authorisation system for clinical trials with a central portal for sponsors and regulatory authorities is being introduced throughout Europe. After the end of the transition period (2023), all new clinical trials – and, from 2025, all ongoing trials – will be subject to the new regulation. The insurance market is generally prepared to offer solutions that support the new regulation.