Loss of research and development funding or protecting your R & D

Research and development funding is essential in medical technology as the industry is highly innovative with new start up companies continually entering the sector and existing companies constantly looking to enhance existing products and develop new products.

What happens if your business suffers a significant loss at your main premises for example a fire, and everything is destroyed?  Your property insurance will replace the bricks and mortar, equipment, tools and even cover a reduction in turnover as result of a business interruption. But what about if the product is not in production, it is only partly developed and you are waiting for the final instalment of funding to come through. Will your insurance provide any protection?

Research and development insurance is essential to ensure that the funding is protected as standard business interruption policies will not respond in these circumstances. With traditional business interruption coverage the trigger for a loss is a reduction in revenue or profit but in the example above, this would be absent.

For those companies who are involved in research and development activities, they will not be receiving any profit or revenue therefore in the event of an insured loss, there will be no cover for the money they have expanded on research and development or for income they have received (and spent) as funding. Loss of market share could be disastrous if the product does not reach its timelines therefore protection of property is key.

In order for companies to benefit from protection under their insurance they should consider having a separate section for research and development under their property damage / business interruption policy which will include cover for;

• Expenditure
• Income
• Committed costs
• Property
• Additional increased cost of working
• Increased cost of working