Capital MarketsCyber riskInsurance

Life Sciences Treasurers Speak to Capital Market Strategies, Insurance and Payment Fraud Mitigation

By June 9, 2020 June 11th, 2020 No Comments

By Joseph Neu

The NeuGroup Life Sciences Treasurers’ Peer Group completed its H1 meeting series last week, sponsored by Societe Generale. Here are a few takeaways I wanted to share:

Three types of companies with three capital markets crisis strategies. Life sciences businesses, like those in most sectors, fall into three general capital market strategy buckets:

  1. Those needing rescue capital in order to survive through this crisis.
  2. Those looking to fortify their balance sheets.
  3. Those looking to be opportunistic to monetize high stock volatility and build acquisition capital to diversify their growth portfolio.

Most members saw the crisis as a reason to build liquidity to give themselves the option to fund R&D, have dry powder for an acquisition and fund share buybacks or dividend payments.

  • That means the majority of companies in this group have one foot in the balance sheet fortification strategy and the other in the opportunistic and strategic bucket.

Pandemic pushing traditional insurance out. A session on the insurance market impact of COVID-19 revealed that the market is driving retention increases, with as much as 60 percent increases on renewal quotes.

  • But higher retention is not leading to the expected premium relief, especially on D&O and property coverage.
  • Some corporates are not even able to get competing quotes on D&O.

The feeling that the insurance market is broken is compounded by the lack of direct and indirect pandemic coverage found in current policies. Some of this is still to be determined by legislation and litigation. Plus, members are told that outright pandemic exclusions should be expected going forward and pandemic coverage, if offered at all, will come at a very high price.

  • These circumstances have more members weighing creative coverage and alternatives to traditional insurance, such as captives and group captives, perhaps even for D&O.
  • They are also allocating more lead time to the renewal process to consider all options. 

Payment fraud prevention in focus. Cyber risk of all kinds has risen during the work from home phase of the virus and remains high as more workers return to the office. But payment fraud is top of mind. One member presented to the group a layered approach to preventing payment fraud.

  • A key insight was the focus on contractual language now embedded in their supplier portal to put the onus on all vendors to comply with their cybersecurity requirements, including immediate notice of a business email compromise.
  • Plus, the supplier portal allows the firm to use credentialed logins to identify the right person to confirm remittance discrepancies.
  • Another popular best practice is to implement after-action reviews to go over any issues or events to make them into a teachable moment.
  • These reviews complement well a reward system where anyone who takes the extra step to confirm a potentially fraudulent payment or prevent a real one is acknowledged.

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Joseph Neu

Author Joseph Neu

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