Last month, Australia based international brokerage Honan Insurance Group announced its acquisition of Melbourne based specialist brokerage Modern Risk Solutions.
Modern Risk is a specialist in a growing area for brokers. Since 2013 the firm has provided insurance in the life sciences and biotech sectors. It also helps bring new investment into these areas by derisking start-ups and new projects.
“Previously the insurance industry, I think, treated it as an SME business and didn’t really appreciate the unique nature of these types of ventures,” said Modern Risk’s founder Geoff Stooke (pictured).
Until Modern Risk launched in 2013, Stooke said this area of insurance was usually handled by general brokers and big multinational insurance companies.
“It [start-ups in life sciences and biotech] is a very different business compared to, for example, an established small to medium size enterprise given the level of scale that can happen quite quickly,” he said. “Also, with a lot of early stage ventures they really don’t know what they’re going to be and they may pivot quite rapidly to find that repeatable, scalable model.”
In the past, start-up projects in the life sciences and biotech sphere often had little option apart from products designed for more general SME businesses.
“So we’re very much focused on advice and being able to create solutions that are aligned to the client as opposed to the insurer using an off the shelf product that’s making one size fit all,” said Stooke.
During the decade since Modern Risk’s launch, the city of Melbourne, an office location for both Honan and Modern Risk, has consolidated its status as Australia’s life sciences hub.
“I think Melbourne really has taken that space in life science. It’s the only Australian city with two of the world’s top 100 universities, particularly because of Monash being the inventor of IVF (in vitro fertilisation) technology,” said Stooke.
Melbourne has a range of health research organizations, including the Peter Mac Cancer Centre and the Murdoch Children’s Research Institute.
Many of Stooke’s clients need insurance that covers the range of risk scenarios presented by clinical trials and telehealth.
“The example of telehealth is a good one because you’ve really got digital risks, meeting medical malpractice meeting the general liabilities that exist in business anyway,” he said.
Other projects involve patents or proprietary rights in new biotechnology ventures, medical devices and health products across areas including aged care and pharmaceuticals. Often these health projects connect with the digital sphere.
Modern Risk can take responsibility for the due diligence process to help rule out any intellectual property issues or other risks to enable these projects and businesses to scale and grow.
Stooke said these projects can be challenging and difficult to place because the insurance industry likes to compartmentalize different risk areas.
“It’s either liability, or cyber, or professional indemnity, for example. Everyone has their own area but to try and get the silos integrated and create a solution for a client, that, I guess is where we’ve been able to assist and navigate,” he explained.
He said in terms of investment from private equity and venture capital, the life sciences and biotechnology areas are doing well right now.
“All the areas I’ve just mentioned are certainly attracting a lot of third-party finance and external finance and capital coming into them to scale and grow,” said Stooke.
Teaming up with Honan allows Modern Risk to access more resources and capacity.
“I think as an insurance group they’re looking at specialization as a way forward as opposed to being all things to everyone. They would actually like to have big capabilities in distinct industry verticals which aligns with us and culturally they’re just a really good fit,” he said.
However, Stooke is also impressed by Honan’s ability to be nimble and responsive.
“With a lot of organizations, regrettably, when they get to a certain size you almost get inertia and friction and they can be slow moving in terms of picking up the opportunities but one thing that I think really sets Honan apart is that they move fast,” he said.
Modern Risk has joined the Honan Group but will be a distinct, stand-alone business operating under its own brand. The firm’s five permanent employees are merging with Honan and moving into their Melbourne IBM Centre offices.
