Global Risk Solutions

Businesses have grown used to the idea of insurance providing them with financial protection against many risks. Of course, businesses have to analyse risk, manage it as best they can, and then insure the remaining risk. But sometimes the risks are simply uninsurable. Or rather, the likelihood of a claim is so high, or so potentially huge, that it becomes so unattractive to insurers that they price it out of the market.

Unfortunately, these risks are often the ones that are causing the biggest headaches to businesses. One such example is patent infringement.

It's pretty clear that patent infringement risks are becoming more common, and more costly. We're talking millions of dollars and often that is just the legal costs, let alone potential damages. And for companies in the communication and technology sectors in particular, it's a major risk, as they are the ones at the forefront of pushing new products, new technologies and new designs.

Perhaps not surprisingly, insurers are concerned about the potential for large claims and the difficult nature of underwriting such risks. It seems to me that patent infringement is rarely clear cut - it can often be a negotiating tactic between competitors, or part of the growing compensation culture globally. And so insurers are either scared off altogether, or require vast amounts of due diligence to be carried out, and charge a high premium.

But patent infringement isn't unique in this regard. Let's face it, there are plenty of other areas where there are major risks, but where insurance isn't providing the protection it should. Take credit risks for example. Does this mean patent infringement is effectively uninsurable? I don't think so.

Let's go back to basics for a moment. Insurance has always been about the premiums of many paying for the losses of a few. What insurers require is a diversified exposure, so the answer for patent infringement liability insurance, as with many other areas of risk, is to provide insurers with a higher volume of risks. And this is exactly what we're trying to achieve for clients. It just requires experienced and committed insurers, and realistic and understanding buyers.

To read our Risk Specialist article on Patent Infringement, please click here.