Xenome chief flags industry insurance fears

There are fears the current insurance industry upheaval will force some biotechs to the wall unless the Gene Technology Act 2000 is overhauled.

Insurance companies are unwilling to give small biotechs the coverage they need to comply with the Act, according to Xenome Ltd co-founder Dr Roger Drinkwater.

If biotechs can't produce such insurance, they risk being shut down by the Office of the Gene Technology Regulator.

"In the last six months, we and every other organisation on the planet have found professional indemnity insurance exceptionally hard to get," Drinkwater said.

"Our insurance broker has been to more than 12 different insurance companies around the world and none were willing to provide us with the type of indemnity cover we requested."

It is not so much a question of astronomical premiums as an unwillingness to take the business at any price, according to Drinkwater.

"They were so gun-shy that none were prepared to even give us a quote."

Xenome, which is developing pain-killing molecules derived from marine species, and other small biotechs are "caught in a web of international change," Drinkwater said.

"Insurance companies across the board have looked at terrorism and other aspects of providing general indemnity cover, and decided the potential risk is so enormous they shouldn't be in the market."

Under the Gene Technology Act, any company working with genetically modified organisms must set up an institutional biohazard committee whose members must carry professional indemnity insurance.

The biohazard committee monitors the organisation's research activities and reports to the OGTR.

Without a functioning biohazard committee, no organisation will be accredited by the regulator to continue its research.

Xenome, which is working with pain-killing molecules derived from marine toxins, has recently received second-round funding of $4.5 million.

If it can't find insurance, however, its current licences will not be re-issued by the OGTR and the company will be forced to shut down, Drinkwater said.

It is facing a tight time frame even though its current licence doesn't come up for re-issue until June 2003. In practical terms, the re-submission deadline for the licence is just three months away, he said.

Like many small players which don't have the resources to set up their own multi-member biohazard committees, Xenome currently piggybacks on a committee established by a larger organisation.

A spin-off of the University of Queensland, Xenome is one of a number of small companies sharing the university's biohazard committee. But Xenome can't continue to do so if it can't suitably indemnify the committee against risk, said UQ executive dean of the faculty of biological and chemical sciences, Prof Mick McManus.

Even large organisations such as universities are finding the issue of securing insurance coverage "a bit of a challenge" McManus said.

The problem was much more acute for small biotechs "because insurers want to know how much cash they have behind them."

McManus said he believed the Gene Technology Act needed more flexibility built into it in order to accommodate situations like Xenome's.

"The Act has a lot of good intentions but I don't think it was sufficiently thought through," he said.

Only one letter highlighting the insurance issue is on file at the OGTR, according to OGTR spokesperson Kay McNiece.

It came from a major multinational and apart from it, the OGTR has had no indication of wide concern over the issue, she said.

She suggested most biohazard committees were composed of employees of the organisation doing the research who should be covered under its corporate indemnity policy.

That was disputed by Drinkwater, who said corporate and professional indemnities were not interchangeable.

On anecdotal evidence, premiums for professional and public liability have jumped by 300 per cent in recent times, according to a spokesperson for the Insurance Council of Australia.

Small biotechs blocked from finding insurance coverage onshore should look at international insurers, the spokesperson said. They should try shopping their business between insurance brokers until one is successful in finding what they require, she suggested.

The premium hikes have multiple causes ranging from the failure of insurance giant HIH, which was a leader in public liability insurance, to insurance losses due to international terrorism and general rises in the number of claims and the size of payouts.