The insurance industry is beginning to see the emergence of new kinds of coverage to protect life science companies from contingencies traditionally not covered by political risk policies. Political risk coverage is often underwritten to protect insureds from the nationalizing and confiscating of assets by sovereign nations, or to provide indemnity for political violence. However, reports such as those in the Business Wire found here indicate that the political risk industry is evolving to include additional coverage of risks particularly worrisome to the life science industry. In particular, policies are being crafted to provide additional protection against what has been termed “delayed access” whereby an action by a governmental entity prevents or delays an insured from meeting delivery expectations or satisfying other terms of a contract. In addition, political risk policies may also include “waste coverage” which will protect an insured against the risk of a product expiring or becoming damaged due to a delay caused by a governmental official.
As the life sciences industry frequently involves the production and distribution of complex materials, it is not surprising to see the political risk market adapt to satisfy the growing needs of industry participants. In addition, we expect to see the surplus lines market expand to facilitate and provide new and creative forms of political risk coverage (in states that allow for surplus lines insurers to write political risk coverage) in order to satisfy the increasing needs of insureds worldwide.
