7 January 2026
Supplier and customer extensions are optional additions to a Business Interruption policy that broaden its scope.
For life sciences organisations, they can be particularly valuable because disruption often occurs outside your own premises but still stops or delays regulated, time sensitive operations. These extensions can help a business to claim for financial losses if a key supplier or customer experiences an insured disruption (for example fire, flood, or other covered damage) that then impacts your ability to operate.
For example:
-
A biopharma manufacturer relies on a single supplier for a critical raw material, single use consumables, packaging, or specialised spare parts for GMP equipment. If that supplier’s site is damaged and cannot deliver, production may need to pause, batches may be delayed, and release timelines impacted.
-
A CDMO or specialist manufacturer producing product for a major pharma client could face significant revenue loss if the customer suffers a site incident and can no longer accept deliveries, take title to goods, or progress product through the next stage of the supply chain.
-
A lab or diagnostics business may be disrupted if a key customer (such as a hospital network or reference laboratory) experiences a loss event that prevents testing volumes, sample intake, or service delivery from continuing as planned.
Without these extensions, indirect losses linked to a third-party disruption may not be covered, leaving the business exposed to potentially material financial risk.
Why these extensions matter in life sciences
1) Supply chains are specialised and interdependent
Life sciences supply chains often depend on a limited number of qualified vendors due to validation, regulatory requirements, IP protection, and quality assurance expectations. Where alternative suppliers exist, switching can be slow because of qualification and change control processes, and lead times may be longer for cold chain, controlled substances, or sterile components. A single upstream disruption can create knock on effects across multiple sites and programmes.
2) Coverage can be aligned to real operational risk
Supplier and customer extensions can be structured to reflect how life sciences businesses actually operate. Cover can be tailored to named critical partners (for example sole source API manufacturers, key packaging providers, or a primary distribution hub) or apply to unnamed partners based on defined criteria such as spend, dependency, or revenue concentration. This helps ensure the policy responds where the exposure is greatest, rather than relying on generic assumptions.
3) Supports continuity, cash flow, and recovery planning
These extensions can help provide a financial safety net that helps protect cash flow and supports ongoing costs during disruption, such as payroll, facility overheads, and contractual commitments. In a sector where delays can have contractual, reputational, and patient impact implications, having cover that recognises dependency on third parties can help businesses stabilise faster and maintain momentum in recovery.
Conclusion
If your life sciences business depends on specific suppliers, customers, or service partners to function, supplier and customer extensions on your Business Interruption policy are not simply a “nice to have”. They help ensure insurance cover reflects the realities of validated supply chains, concentrated customer relationships, and operational dependencies, providing essential protection when disruption happens beyond your own four walls.
This material is for general information only and does not constitute advice or a personal recommendation. Cover is subject to insurers policy terms, conditions, and exclusions.
