AusBiotech to probe industry's insurance woes

Rumours that biotechnology companies are finding it hard to renew professional indemnity insurance policies have led industry association AusBiotech to investigate the potential for problems.

"It originally started off as a rumour that professional indemnity would be difficult to obtain," said AusBiotech executive director Tony Coulepis. "We are becoming more aware that it is an issue, but whether it is a problem or not hasn't been established."

He noted that companies might not become aware of the issue until their policy was up for renewal.

Coulepis said that while no biotech company to his knowledge had been denied insurance, he had heard of instances where companies had been given the run-around, and in some cases insurance brokers had provided extensions to coverage while negotiating with insurance companies.

"To us, that starts to be problematic," he said.

John Rutledge, AusBiotech's finance and administration manager, who is investigating the issue, said members would shortly receive a letter from the organisation outlining their concerns and asking whether companies had actually experienced problems in renewing or obtaining insurance.

"Anecdotally there would appear to be a problem, but we're not sure if it is confined to the biotechnology industry. There is a lot of pressure within the underwriting industry to establish profit in the books. I don't believe that it is limited to biotechnology," Rutledge said.

Feedback from the biotechnology industry would be used by AusBiotech to determine whether there was a bigger problem facing the industry, and allow them to formulate a plan to deal with it, said Coulepis, who urged all industry members with concerns to respond, regardless of whether they were members of AusBiotech.

Professional indemnity insurance covering directors and officers of companies is commonly taken out by companies to indemnify those individuals for a wrongful act committed by them in their role as a director or officer. Generally it protects personal assets and also reimburses legal expenses paid by the company.

Wrongful acts include breaches of duty, breaches of trust, neglect, errors, misstatement or misleading statements, omission, breach of warrant of authority, or any other act or matter involving a director or officer of a company whilst acting in that capacity.

According to the Australian Securities and Investments Commission, there is no legal requirement for publicly listed companies to carry professional indemnity insurance. However, Coulepis noted that directors and officers needed to be covered by this type of insurance in order to protect themselves, as well as shareholders and stakeholders, from unforeseen circumstances.

• John Rutledge may be contacted by email at: jrutledge@ausbiotech.org