3 Key Risks Facing the Life Sciences Industry

As life sciences companies continue to embrace digital transformation and advancements in large language models and AI, the industry is moving from experimentation to execution. In 2026, the focus has shifted toward measurable outcomes, more advanced applications, and faster speed to market. Nearly 50% of industry executives say that accelerating digital transformation and generative AI are among the key trends that will substantially impact their organisation in 2026¹.

These advances also come with additional risks and strict data privacy laws, imposing requirements on life sciences companies operating globally, such as the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA).

The high-value data life sciences companies hold, including intellectual property, clinical trial results, and protected health information, also makes them a prime target for cybercriminals. Additionally, network-connected medical devices introduce new risks. If security vulnerabilities are exploited, a bad actor could disrupt a hospital’s entire system or even manipulate medical devices such as infusion pumps, posing direct harm to patients. Beyond traditional cyber threats, organisations must now also consider AI-specific exposures, including model manipulation, training data vulnerabilities and intellectual property leakage, particularly as AI tools become integrated into core business processes.

In 2026, 35% of executives report cybersecurity concerns will significantly impact their organisational strategy². While many insurers exclude cyber-related bodily injury or property damage from product liability coverage, Chubb’s Premier Life Science policy offers a comprehensive solution for such injury or damage, as well as traditional first and third party cover for losses arising from data breaches, ransomware attacks and other cyber threats, providing critical coverage that standard policies do not.

To help prevent a data breach or cyber compromise, life sciences businesses will want to consider implementing best practices for cyber and digital application security and compliance, including:

• Implementing strong application security practices by securing software and hardware development early in the value chain.
• Conducting regular security audits and penetration testing to identify vulnerabilities before they can be exploited.
• Applying strict access controls, including following the principle of least privilege, ensuring only authorised personnel can access sensitive systems.
• Developing incident response plans to ensure rapid containment and recovery in the event of a breach.
• Ramping up compliance with evolving privacy protocols, including maintaining up-to-date policies in line with global regulations such as the GDPR and HIPAA.

The United States remains one of the largest and most complex markets for life sciences companies, offering immense opportunity but also heightened exposure. Product liability is a significant concern, particularly for companies involved in medical devices, pharmaceuticals or biologics. 

A single product-related issue can lead to a domino effect of complex losses, mounting expenses and reputational damage over a protracted period. Meanwhile, ensuring compliance with evolving U.S. Food and Drug Administration (FDA) regulations creates additional exposure across clinical trials, manufacturing and post-market surveillance.

These risks are not theoretical. In April 2024, a U.S. medical technology manufacturer faced over $1.1 billion in recall-related and remediation costs related to sleep apnea devices that violated FDA regulations³. This was one of the largest product liability settlements in the sector to date, with payouts amounting to around $580 million⁴. The case highlights how a quality or safety issue can cascade into widespread challenges and substantial financial losses, necessitating a robust insurance safety net with general liability, product liability and excess casualty coverage.

FDA oversight, including monitoring activities such as inspections and audits conducted by the governing body, adds another layer of complexity. Warning letters issued by the FDA alerting companies that they have violated their regulatory requirements have increased by 43% in recent years⁵. For international importers, a Warning Letter can trigger Import Alerts, allowing U.S. authorities to detain products at the border without advanced notice, posing material supply chain and revenue risks. Resolving such enforcement requires documented corrective measures, follow-up inspections and often legal advice — all of which can impact a company’s risk profile and potentially its ability to qualify for insurance coverage. 

The full impact of FDA oversight priorities and import enforcement protocols remains uncertain. As a result, life sciences companies need to ensure compliance while also strengthening insurability and risk posture. To accomplish this, companies should consider the following actions:

• Maintain thorough documentation of clinical testing, safety evaluations, adverse event responses, and regulatory compliance to support claim defence and underwriting reviews.
• Ensure all product labelling, manuals and marketing materials are accurate, current, appropriately translated and aligned with FDA requirements.
• Engage experienced U.S.-based legal counsel with a track record in FDA regulations and product liability defense to stay ahead of regulatory developments and litigation trends.
• Integrate risk controls across the product lifecycle, from R&D and manufacturing to marketing and post-market surveillance, to reduce the likelihood and severity of claims. 

Life sciences companies operate in a highly globalised supply chain, making them vulnerable to any number of disruptions. Recent years have shown how quickly supply chains can be upended — whether by a pandemic, trade restrictions including export controls, shipping route delays or blockages, or geopolitical instability.

More than 50% of non-U.S. based life sciences companies anticipate that national regulatory changes, including AI governance and sustainability requirements, will shape strategy, while 39% cited geopolitical uncertainties as top challenges for 2026⁶. Companies are increasingly focused on cost pressures, patent expirations and margin compression, all of which place additional strains on globally distributed manufacturing models. 

Unlike other industries, life sciences manufacturers cannot simply switch suppliers quickly in response to supply chain disruption. Regulatory bodies such as the FDA in the U.S. and other market regulators worldwide often require extensive testing and approval processes before a new supplier can be introduced. If a key component or material is sourced from a limited number of approved suppliers, even a temporary disruption can create significant delays in clinical trials or the delivery of approved medical products.

In 2026, supply chain resilience is closely linked to operational efficiency. Companies are reassessing manufacturing footprints, nearshoring strategies and technology investments not only to mitigate disruption but also to improve cost control and R&D productivity. To mitigate risks in clinical trials, increase supply chain resilience, and ensure a stable supply of finished products for approved markets, life sciences businesses will want to consider:

• Developing a formal disaster recovery plan, which includes identifying alternative vendors and contingency solutions in case of disruptions.
• Broadening risk awareness by considering not only natural disasters, but also other risks such as cyber threats and geopolitical tensions.
• Diversifying suppliers, including nearshoring critical components to reduce dependency on a single region where possible.
• Vetting partnerships by conducting rigorous due diligence on all suppliers to ensure they meet regulatory and quality standards.
• Avoiding over-reliance on one supplier, including considering multiple sources to protect against potential bottlenecks.