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Clinical trial liability insurance has been around for more than two decades. But as the development and testing of new drugs has gone global, risks in the sector are growing and also becoming more nuanced, according to executives from two of the bigger carriers offering the coverage.

Executive Summary

Clinical trial liability insurance has been around for decades. But the increase in the number of trials—combined with anticipated changes in product delivery, regulation and market consolidation—will force carriers that offer the coverage to adapt, according to experts at Chubb and OneBeacon.

“The number of clinical trials is escalating,” said Frank Goudsmit, vice president, life sciences property and international manager at Chubb Group of Insurance Cos., perhaps the largest domestic life sciences underwriter. “As the pharmaceutical pipelines are drying up, [drug companies] are looking to replace revenue with new investigations of products.”

Two executives from OneBeacon Insurance Group’s technology insurance division—Todd Lauer, vice president of medical technology, and Jim Keenan, a medical technology underwriting consultant—say the coverage has evolved and become more sophisticated as regulatory and oversight demands have changed and increased. The pair said, for example, that coverage might now include medical malpractice for clinical investigators in addition to listing them as additional insureds, but the changing demands for the coverage go well beyond that.

“The scope of entities that are automatically included as additional insureds has expanded and now routinely includes entities such as clinical oversight, ethics committees or IRBs (institutional review boards), clinical trial consultants and more,” Lauer and Keenan told Carrier Management via email.

As well, they said coverage increasingly has evolved to entail policy periods that match the length of the actual trial instead of traditional 12-month terms. Clinical trials can last anywhere from six months to a number of years.

Chubb’s Goudsmit said that clinical trials have become more complex, in part because many now take place outside of the United States.

“There is no jurisdiction sponsoring more trials than in the U.S., but Europe is not far behind, and Europe is a very complex continent from an insurance regulatory standpoint regarding clinical trials,” he said.

Goudsmit explained that in the U.S., insurance liability coverage for clinical trials is “de facto compulsory” where there isn’t technically an automatic liability, but it is a practical necessity to get coverage so that a trial will be approved by a given institution’s ethics committee.

It’s much different in Europe, however, which requires compulsory insurance liability cover for clinical trials.

“Just like auto liability in the U.S., there has to be a protocol-specific policy at statutory-required limits issued by an admitted insurance company,” he said.

Clinical Trials: Not Like Other Coverage

Clinical trial insurance is unique, standing apart from other kinds of coverage, Goudsmit said.

“It is a line of business where potential claimants are participants in a clinical trial,” he explained. “They agree to participate and receive an investigational product—a product that has not yet proven to be safe and effective.”

Making that decision is a pretty powerful one, Goudsmit said, because “oftentimes people do it with a very altruistic motive,” with no guarantee of safety or efficacy.

“They are doing it because they want to advance our understanding of diseases and help in the process of developing therapies for challenging disease states,” he added.”

Beyond that, however, Goudsmit said that insurers face challenges in providing coverage and related logistics to the trial sponsor, principal investigators, clinics, ethics committees or IRBs (which set trial guidelines in the EU and U.S., respectively).

“One of the challenges is the logistical challenge of providing the client, the sponsor, with the documentation they need to submit to the ethics committee at each of the institutions where the trial is going to take place,” he said.

Ethics committees meet infrequently, and if insurers miss deadlines to gain certificates of insurance for their clients, trial sponsors can lose vital months to test new compounds, he said.

“In the clinical trial space, a certificate of insurance is mission critical to prove to the satisfaction of the [research] hospital that the sponsor has necessary insurance,” Goudsmit said. “Those types of delays are unacceptable to life sciences companies because they have a limited patent exclusivity on compounds. So it is critical that trial happen in a timely manner, and the absence of [certificate of insurance] documents can set the timeline back.”

As well, he said, clinical trial coverage has another unique element—trial participants must sign an “informed consent” document that outlines the risks of participation.

Those signed documents are key to defense of liability claims, Goudsmit noted, as they are often the target of plaintiffs who “will seek to undermine the strength of informed consent forms in litigation.”

Chubb and OneBeacon are among several carriers that handle clinical trial coverage, but OneBeacon’s Lauer and Keenan said they don’t expect an onslaught of new rivals any time soon.

“While it might be considered to be a line of coverage with a lot of exposure, the actual premiums developed don’t warrant a lot of insurers chasing the business,” they said. “Also, many clients require the coverage overseas, and some insurers don’t have the capacity—or desire—to establish a network of foreign insurers to make pursuing this business worthwhile.”

“There are several carriers that will offer the coverage, but that number is relatively constant,” the pair said, “as most new entrants to this field seem to focus on excess products liability where they can utilize their capacity with greater premium returns.”

Changes Coming With Consolidation, Regulation and Technology 

If there’s any change in the wind for clinical trial coverage in the next five to 10 years, Lauer and Keenan at OneBeacon said it will come from market consolidation, which would reduce the number of competitors in the field. They also see the Internet as potentially disrupting the status quo.

“Coverage may become available to the sponsors directly through the Internet, similar to people buying their personal auto coverage today,” the pair said.

Goudsmit, at Chubb, said he sees future coverage driven by regulatory changes abroad. For example, he expects more and more countries around the world to make clinical trial coverage compulsory, now that clinical trials have become a global enterprise.

“Whenever there is a case where participants are seriously injured in a trial, it draws a lot of media attention” he said. “Governments don’t want to hear there is no insurance available to insured subjects.”

Goudsmit also expects compulsory limits to increase.

“Typically, [limits] might be 500,000 euros per participant” for trials in the European Union and five million euros in aggregate for one protocol, he said. “Those are pretty chunky limits.”