That was the view of Mark Getty, grandson of the American oil magnate, J. Paul Getty, a few decades ago and, while the value of oil has maintained, it appears he wasn’t far off the mark.
According to Ocean Tomo, the IP merchant bank, in 1975, intangible assets accounted for only 17% of the value of companies in the S&P 500 compared to 90% today. This huge increase in the value of intangible assets is driven by the fact that most of the modern world lives in a knowledge economy and as such, assets such as patents, trademarks, copyright and trade-secrets are more valuable than ever before.
And these assets are not the preserve of large multi-national organisations alone. The value of intangible assets is just as important to SMEs and mid-size companies, perhaps even more so where a legal dispute can be the difference between survival and business failure.
According to the World Intellectual Property Organization, international patent applications increased by 4% to a record 275,900 applications, despite the 3.5% decrease in global GDP in 2020. But while the importance of IP rights and protecting them legally is clearly high on the agenda, the risk transfer aspect of that protection has been, historically, less of a priority.
Indeed, according to the Financial Statement Impact of Intellectual Property & Cyber Assets: 2020 Aon-Ponemon Global Report, only around 15% of these are currently insured, compared with more than 60% of tangible assets. This, however, may be set to change as the insurance sector rapidly evolves and innovates to provide the protection that modern businesses require.
Tokio Marine Group has been operating in this rather niche sector for several years now – primarily through the Lloyd’s market – and Tokio Marine HCC has been working hard to raise awareness of the value of intangible assets and the risks associated with them in Europe. Whether it is an SME with proprietary technology or a multi-national with well-established trademarks, the need for insurance to protect IP is paramount.
Reflecting the nature of IP, we have focused on developing flexible insurance solutions to suit the individual needs of clients. That tailoring does not make it any more complex than other risk transfers. However, its cost-benefit ratio is still often underestimated.
Ultimately, the protection that IP insurance provides enables companies to fight any claims made against them, helps them maintain stable finances and provides them with the expertise of a specialist insurer in the management of what are often complex disputes.
For example, Tokio Marine HCC covers a wide range of risks, including corporate liability risk for infringement of third-party IP rights (included under a contractual indemnity provision) and the risk of a challenge to the validity of a company’s own IP rights. The offering is expanding all the time and we are currently looking at providing pre- and post-incident services, in line with our cyber offering.
In a global economy, it is more important than ever that IP cover can be written and managed across borders. Tokio Marine HCC can underwrite risks across continental Europe. After establishing our IP product footing in France and Belgium, we are launching activity in Germany and the Netherlands, which will be followed by other markets soon.
This activity, alongside our peers in the market, is gaining traction and we are increasingly contacted by organisations that have realised the financial impact they could suffer in the event of claims over IP rights.
The need for cover has been further driven home by the fact that uncapped indemnification provisions concerning infringement of IP rights are becoming standard in contractual undertakings between sellers, customers and partners, with a growing requirement to insure them.
This applies to most companies in today’s global economy and it appears that more and more of them now fully understand the full value of their intangible assets and the crucial need to protect them in every way possible.
And increasingly, we are seeing a greater level of understanding of these issues right across the business spectrum – SMEs as well as large firms are coming to us to explore ways in which they can protect their balance sheet against the severity of IP risk exposure.
To find out more, contact [email protected]
Contributed by Marie L’Affeter-Gebert, Underwriting Manager – Intellectual Property, Tokio Marine HCC & Valentin Weihrauch, Underwriter ‑ Financial Lines, Tokio Marine HCC