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Mid-market insurance
Drug discovery company insurance is the programme of property, business interruption, D&O and liability cover protecting pre-clinical biotech research businesses. It matters because their value sits in materials, data and funding that standard packages undervalue.
Part of: Medical technology insurance
In short
Pre-clinical drug discovery companies usually need laboratory property cover that values cell lines and research materials on a cost-to-recreate basis, business interruption written around increased cost of working, D&O suited to venture-backed boards, PI for collaboration deliverables, employers' and public liability, and cyber. IP and licensing disputes usually sit outside standard liability policies. Clinical trials insurance becomes a filing requirement once the company sponsors a study involving people. Review cover at each funding round, major deal and move towards the clinic.
A UK pre-clinical drug discovery or biotech research company usually needs laboratory property cover that values research materials properly, business interruption written around increased cost of working rather than lost sales, directors' and officers' (D&O) cover suited to a venture-backed board, professional indemnity for collaboration deliverables, employers' liability, public liability, cyber and, once a candidate moves towards people, clinical trials insurance.
The challenge is that most of the company's value is intangible and pre-revenue: cell lines, compound libraries, assay know-how, data and the board's ability to raise the next round. A standard commercial package built for a trading business often misses all of that. Our overview of life sciences and biotech insurance sets out the wider market.
How the main exposures usually map to cover, subject to the policy terms:
| Exposure | Cover that usually responds | Points to check |
|---|---|---|
| Fire, flood or escape of water in the lab | Property | Sums insured for equipment, fit-out and leasehold improvements |
| Loss of cell lines, biobanks or compound libraries | Property with research materials or deterioration extensions | Basis of valuation: cost to recreate, not market value |
| Programme delayed after a loss, with no revenue to lose | Business interruption (increased cost of working or additional expenditure) | Extra costs to rent lab space, outsource assays and retain staff |
| Collaboration partner alleges deliverables were negligent | Professional indemnity | Whether milestone-based contract claims are excluded |
| Investor or shareholder claim after a funding round | D&O | Securities and prospectus exposures, and investor-required limits |
| Licence agreement indemnities and IP warranties | Usually outside standard liability policies | Specialist IP cover, and how indemnities are capped |
| Researcher injury or exposure to hazardous substances | Employers' liability | COSHH controls and biological agent assessments |
| Theft of research data or ransomware | Cyber | Restoration of research data and forensic costs |
| First human dosing of a candidate | Clinical trials insurance | Required evidence for the ethics application, and the sponsor role |
Regulatory safety studies usually need to be run under GLP, either in house or through a CRO in the MHRA's GLP compliance monitoring programme. Work involving regulated procedures on animals needs an establishment licence under the Animals (Scientific Procedures) Act 1986; many discovery companies outsource this, which moves the property and liability exposure into the contract.
Storing human tissue for research in England, Wales and Northern Ireland can need a Human Tissue Authority licence, though tissue for an ethics-approved specific project is often exempt.
The Control of Substances Hazardous to Health Regulations 2002 require risk assessment and control of exposure, with health surveillance where appropriate. Employers' liability must meet the £5 million minimum in regulation 3 of the 1998 regulations.
The clinical trials regulations require insurance or indemnity covering the liability of the investigator and sponsor, and the MHRA inspectorate has stressed that sites should check sponsor cover is suitable. If your company sponsors its first study, clinical trials insurance moves from a future question to a filing requirement. Start that conversation well before the ethics submission.
Illustrative. A failed compressor and missed alarm destroy years of patient-derived organoids. Recreating them means re-sourcing tissue, re-deriving lines and re-validating assays. A policy valuing the material at its consumable cost would pay a fraction of the real cost; one written on a cost-to-recreate basis, with an increased cost of working limit, is far more useful.
Illustrative. A pharma partner alleges that assay data delivered under a collaboration was flawed and withholds a milestone payment. Part of the dispute is a negligence claim that PI may cover; the withheld milestone itself is usually a commercial loss PI does not pay.
Illustrative. After disappointing pre-clinical data, a down round dilutes early shareholders, who allege the board withheld information. D&O usually funds directors' defence costs, subject to the terms. See D&O when raising investment.
For a pre-revenue company, underwriters usually focus on people, plans and controls. Useful information includes:
Drug discovery companies change fast. Book an insurance programme review when:
Related: medical technology insurance, medtech company insurance, CRO insurance and PI for clinical and scientific researchers. Apex arranges insurance for drug discovery and biotech research companies; a broker reads every enquiry.
Typically laboratory property with research materials cover, business interruption on an increased cost of working basis, D&O, professional indemnity for collaboration work, employers' and public liability, and cyber. Clinical trials insurance becomes relevant when a candidate approaches human studies. The mix depends on what you do in house and what you outsource.
Usually under the property policy with a specific extension, valued on the cost to recreate them rather than market value. Deterioration cover for freezer and power failure is important, and insurers will ask about monitoring, alarms and back-up storage. Materials held by partners may need separate arrangements.
Many do. Term sheets and investment agreements often require D&O cover at a set limit, sometimes with Side A protection for individual directors. Check the requirement before completion so the policy is in place when investor directors join the board.
It may cover a claim that your work was negligent, such as flawed data or a mishandled assay, subject to the policy terms. It usually does not cover a partner simply being unhappy with results, a missed milestone payment or a commercial dispute over licence terms. How the agreement defines deliverables and caps liability matters as much as the policy.
When it sponsors or is about to sponsor a study involving people. UK clinical trials rules require insurance or indemnity covering the liability of the investigator and sponsor, and evidence of it forms part of the ethics application. Arranging cover can take time, so start early.
Send us your current schedules or renewal pack and we will review the whole programme and tell you plainly what to keep and what to change. No fee and no obligation. Or call 0117 325 0027.
Book a programme review Get a quoteApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
