Insurance Due Diligence For Clinical Trials In Fundraising

What’s in this article

You’re three weeks into Series B due diligence, or you’ve reached exclusivity in an acquisition process, and the buyer’s technical team has just submitted their insurance questions. Twenty-three detailed requests covering policy wordings, claims history, CRO indemnities, regulatory correspondence, vendor insurance certificates, and specific questions about that phase II incident from eighteen months ago that you disclosed in the data room.

This isn’t box-ticking. Sophisticated investors and acquirers use insurance due diligence to pressure-test your risk management, validate that liabilities are covered not just outsourced, and identify exposures that affect valuation or deal structure. This article shows you what they actually look for, how to prepare documentation that builds confidence rather than raising questions, and where disclosure problems derail deals or trigger price adjustments.

It’s written from the perspective of someone who’s reviewed hundreds of these requests—what matters, what’s theatre, and what you need ready before the data room opens.

What do investors and acquirers actually want to see?

The insurance request list looks exhaustive, but sophisticated buyers are probing three things: coverage adequacy, risk transfer reality, and incident management competence.

Coverage adequacy: Do you carry the right types and amounts of insurance for the trials you’re running? Are limits proportionate to participant numbers, trial phase, and product risk? Are there gaps between what you think is covered and what policies actually respond to?

Risk transfer reality: Have you genuinely transferred risk to insurers and vendors, or have you just created contractual promises that aren’t backed by actual coverage? If your CRO contract says they indemnify you for monitoring failures, do they actually carry professional indemnity insurance that covers it?

Incident management competence: When things went wrong—and sophisticated buyers assume something has gone wrong—did you respond systematically, notify properly, document decisions, and manage claims professionally?

The standard request list includes:

Current insurance certificates and full policy wordings for all material covers.
Complete claims history: notifications, reserves, settlements, outstanding litigation.
Trial protocols, investigator brochures, and informed consent documentation.
DSMB charters, safety monitoring plans, and serious adverse event logs.
Contracts with CROs, clinical sites, manufacturers, and logistics providers showing indemnity allocation.
Vendor insurance certificates demonstrating coverage alignment with contractual obligations.
Regulatory correspondence: MHRA authorisations, REC approvals, inspection reports, any warning letters or enforcement notices.
Incident response documentation for any disclosed events.

Buyers aren’t just collecting documents—they’re building a picture of how you think about and manage risk.

How should you prepare the insurance due diligence pack?

The best-prepared companies create a standing due diligence file that’s updated quarterly and audit-ready at any moment. Scrambling to assemble documents after the data room opens signals poor governance.

Structure the pack with clear indexing:

Create a single master document with a detailed table of contents and clear sections. Buyers should be able to find any document in under thirty seconds.

Section 1: Current insurance programme

Certificates of insurance for all active policies (clinical trials, sponsor legal liability, product liability, professional indemnity, cyber, first-party covers).
Full policy wordings, not just summaries or broker presentations.
Renewal history showing three-year trend in limits, premiums, and terms.
Broker correspondence on any declined coverage, exclusions, or non-standard terms.

Section 2: Claims history and reserves

Chronological log of all claims, notifications, and incidents in the past five years.
For each: date, description, parties involved, notification dates, current status, reserves, settlement amounts.
For settled claims: settlement agreements and release documentation.
For open claims: current reserve estimates and expected timeline.
For denied claims: insurer denial letters and the outcome.

Section 3: Trial documentation

Protocols and amendments for all active and recently completed trials.
DSMB charters, meeting minutes (redacted for commercially sensitive details if necessary).
SAE logs with causality assessments and outcomes.
Regulatory approvals: CTAs, REC opinions, HRA assessments.

Section 4: Contracts and risk allocation

CRO master service agreements showing indemnity provisions and insurance requirements.
Clinical site agreements with template indemnity clauses.
Manufacturing and supply agreements showing product liability allocation.
Logistics and distribution contracts.

Section 5: Vendor insurance evidence

Insurance certificates from all material vendors: CROs, manufacturers, logistics providers.
Evidence that certificates are current (dated within past six months).
Confirmation that required limits and coverage types match contractual requirements.

Section 6: Regulatory and compliance

MHRA correspondence, particularly inspection reports.
Any warning letters, enforcement notices, or non-compliance findings.
Corrective action plans and closure documentation.

Index every document. Use consistent naming conventions. Include document dates and version numbers. The quality of your file organisation signals operational competence.

How do you disclose claims history without derailing the deal?

Claims history disclosure is where most friction occurs. Founders worry that disclosing incidents signals weakness. Buyers worry that undisclosed incidents signal governance failures or worse.

The practical approach: disclose everything, but control the narrative through documentation quality.

What to disclose:

Every notified claim, every serious adverse event that triggered regulatory reporting, every incident where insurers were notified even if no formal claim followed.

Concealment is far worse than a disclosed, well-managed incident. Buyers conduct their own searches—regulatory databases, litigation records, Freedom of Information requests to the MHRA. If they find something you didn’t disclose, trust collapses and deals often don’t recover.

How to disclose:

For each incident, provide a structured summary:

Date and description: What happened, when, where.
Immediate response: What actions you took in the first 24-48 hours.
Notifications: When you notified regulators, insurers, and other required parties.
Investigation: Root-cause analysis findings, contributing factors, corrective actions.
Outcome: Settlement amounts, regulatory findings, changes implemented.
Current status: Closed, open with reserves, litigation ongoing.

Include supporting documentation: SAE reports, root-cause analyses, regulatory correspondence, insurer settlement letters.

Why this approach works:

Sophisticated buyers expect incidents—trials are complex, regulated activities with inherent risk. What they’re assessing is your response competence. Rapid notification, systematic investigation, transparent regulatory engagement, and documented corrective actions demonstrate that you manage risk professionally.

A well-documented incident with a clear corrective action plan is often viewed more favourably than a perfect history with thin documentation—the latter suggests either exceptional luck or incomplete disclosure.

What vendor insurance questions do buyers actually probe?

Buyers scrutinise whether your risk transfer is real or illusory. If you’ve delegated trial operations to a CRO with inadequate insurance, you haven’t transferred risk—you’ve just created a gap that becomes your exposure when claims arrive.

Standard vendor insurance questions:

Do CRO insurance limits match the indemnities they’ve given you?
Are coverage types aligned with contracted responsibilities (professional indemnity for monitoring failures, not just public liability)?
Are policies current, or are you relying on expired certificates?
Are you named as an additional insured or interested party where appropriate?
If the vendor is a small entity, are limits credible for the exposures they’ve accepted?

What creates red flags:

Missing vendor insurance certificates.
Certificates that expired months or years ago.
Coverage limits far below contractual indemnity caps (CRO contract requires £5 million indemnity, certificate shows £1 million limit).
Mismatch between coverage type and risk (vendor has public liability but contract requires professional indemnity).
No evidence you’ve verified insurance annually.

What strengthens confidence:

Current certificates (dated within past six months) for all material vendors.
Coverage types and limits that match or exceed contractual requirements.
Annual verification process documented (emails requesting updated certificates, tracking spreadsheet).
Named insured or additional insured endorsements where contractually required.

Buyers want evidence that you actively manage vendor insurance compliance, not just that contracts require it.

What regulatory compliance evidence do buyers examine?

Buyers assess whether your regulatory standing creates latent liabilities or deal risk.

Core regulatory documents:

MHRA Clinical Trial Authorisations for all CTIMPs.
Research Ethics Committee favourable opinions.
Health Research Authority assessments.
Any amendments, variations, or substantial modifications.

Inspection and enforcement history:

MHRA inspection reports from the past five years.
Any findings of non-compliance, even if subsequently closed.
Warning letters or enforcement notices.
Corrective action plans and evidence of implementation.
Closure letters confirming issues resolved.

What buyers are looking for:

Clean inspection history is ideal, but findings with documented corrective actions are acceptable. What creates concern is:

Undisclosed inspections or findings.
Repeated findings of the same issue (suggests systemic weakness).
Open enforcement actions with no clear resolution timeline.
Lack of documentation showing corrective actions were implemented.

Why this matters for insurance:

Regulatory non-compliance can void insurance coverage or trigger exclusions. Buyers want assurance that your insurance programme isn’t compromised by unremediated regulatory findings.

How does insurance due diligence affect valuation and deal terms?

Insurance findings don’t just create information requests—they affect price, structure and reps and warranties.

Valuation impact:

Uninsured or underinsured exposures reduce valuation. If you’re running a phase III trial with 500 participants but only carry £2 million in clinical trials insurance when underwriters would expect £10 million for that profile, buyers will either require you to increase limits before closing or adjust the valuation to reflect uninsured risk.

Large open claims with uncertain reserves create balance sheet risk. Buyers may escrow funds to cover potential settlements or adjust purchase price.

Deal structure impact:

Inadequate coverage can trigger earn-outs, escrows, or indemnity holdbacks. If you can’t demonstrate adequate insurance, buyers protect themselves by retaining more consideration pending claim resolution.

Material undisclosed incidents discovered during due diligence often trigger renegotiation or deal termination, depending on severity and the quality of your response.

Reps and warranties:

You’ll be asked to warrant that:

All required insurance is in place and current.
All claims and incidents have been disclosed.
No facts exist that could void coverage.
Vendor insurance certificates are accurate and current.

Breach of these warranties creates indemnity obligations post-closing. If an undisclosed claim emerges after closing, you may be liable for buyer losses.

The practical consequence: incomplete or inaccurate insurance disclosure creates post-closing exposure that can exceed the original deal value.

What red flags consistently derail deals or trigger price adjustments?

Based on hundreds of transactions, these insurance issues most commonly create deal friction:

Undisclosed claims or incidents. Buyers find them through regulatory database searches or Freedom of Information requests. Trust collapses. Deals often don’t recover.

Material coverage gaps. Running trials without required CTIMP insurance, carrying limits far below reasonable expectations, or missing entire coverage types (no cyber insurance despite holding participant data).

Vendor insurance failures. CROs or manufacturers with no insurance, expired certificates, or limits far below contractual indemnities. This signals you’ve outsourced risk without actually transferring it.

Poor claims documentation. Open claims with no reserve estimates, no investigation reports, or unclear timelines. Buyers can’t assess exposure, so they assume worst case and adjust price or structure accordingly.

Regulatory findings with weak corrective actions. MHRA non-compliance findings with no documented remediation or vague action plans. This suggests governance weakness and potential coverage issues.

Expired or lapsed policies. Periods where trials were running without current insurance. Even if no incidents occurred, this creates latent claims-made exposure and signals poor risk management.

Practical preparation checklist: prepare this now, update quarterly

Build your insurance due diligence file as a standing document:

Current insurance certificates and full policy wordings (updated at every renewal).
Three-year renewal history showing limits, premiums, terms evolution.
Complete claims log with supporting documentation for each incident.
Trial protocols, DSMB documentation, SAE logs (indexed by trial).
Contracts with CROs, sites, manufacturers showing indemnity and insurance provisions.
Vendor insurance certificates (verified annually, indexed by vendor).
Regulatory approvals, inspection reports, enforcement correspondence.
Incident response documentation for all disclosed events.

Update the file quarterly. Conduct an annual internal audit of completeness. When the data room opens, you’re uploading existing files, not scrambling to assemble documents under time pressure.

Bottom line

Insurance due diligence in fundraising and M&A is a credibility test. Sophisticated buyers use it to assess whether you genuinely understand and manage clinical trial risk or whether you’ve just created contractual promises without backing coverage.

Complete, well-organised disclosure builds confidence. It demonstrates operational competence, transparent governance, and systematic risk management. Gaps, omissions, and poor documentation signal the opposite—and buyers price that risk through valuation adjustments, deal structure changes, or by walking away.

The practical approach: prepare your insurance due diligence file now as a standing document, disclose everything with clear supporting evidence, verify vendor insurance annually, and document incident responses systematically. When the data room opens, you’re ready. When questions arrive, you’re answering with evidence, not scrambling for documents.

Insurance due diligence doesn’t just satisfy buyer requests—it’s your opportunity to demonstrate that clinical risk is understood, insured, and managed professionally throughout your organisation.

Reference Reading for Insurance Due Diligence

Financial Conduct Authority (FCA) – Disclosure Guidance. Regulatory requirements for material risk disclosure during fundraising.
Companies Act 2006 – Due Diligence Requirements. Legal framework for disclosure obligations in UK company transactions.
British Venture Capital Association (BVCA)– Due Diligence Toolkit. Look for “Due Diligence Questionnaire” or “Investment Standards”. UK venture capital industry standards for due diligence in life sciences.
National Venture Capital Association (NVCA)– Model Due Diligence Checklist. US venture capital standards (many UK/European deals involve US investors).
Life Sciences M&A Data. BioIndustry Association (BIA)– Life Sciences Reports. Annual life sciences M&A reports or financing reports. UK life sciences industry data on deal volumes, valuations, and trends.
BioCentury– Biotech Financing & M&A Database (some reports publicly accessible).
Journal of Commercial Biotechnology – Due Diligence Papers. Search for: “Due diligence biotech valuation” or “Risk assessment clinical trials M&A”. Mostly peer-reviewed research including on how insurance gaps affect biotech valuations.
ICAEW (Institute of Chartered Accountants in England and Wales) – M&A Due Diligence. Professional accounting standards for M&A due diligence.
ACCA (Association of Chartered Certified Accountants) – Due Diligence Guidance. International accounting body guidance on due diligence processes.

Government & Regulatory

Takeover Panel: https://www.thetakeoverpanel.org.uk/ (UK M&A regulatory framework)
SEC (US): https://www.sec.gov/ (for US-listed biotechs or US investors)
FCA Handbook: https://www.handbook.fca.org.uk/ (detailed regulatory requirements)

Professional Bodies

Law Society: https://www.lawsociety.org.uk/ (legal due diligence guidance)
CFA Institute: https://www.cfainstitute.org/ (investment professional standards)
BVCA Code of Conduct: Specific guidance on responsible investing

Academic Databases

SSRN (Social Science Research Network): Papers on venture capital due diligence
Harvard Business School Cases: Case studies on biotech M&A
MIT Sloan Management Review: Articles on tech/biotech valuation

Industry Associations

ABPI (Association of the British Pharmaceutical Industry): https://www.abpi.org.uk/
BIA (BioIndustry Association): https://www.bioindustry.org/
EFPIA (European Federation of Pharmaceutical Industries): https://www.efpia.eu/

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