Many scientists view nanotechnology as the revolutionary technology of the 21st century. Just as plastics were a pervasive and revolutionary product of the 20th century, nanotechnology products are having widespread use and change our lives in a myriad of ways. This technology has quickly evolved into a global force that is transforming manufacturing, medicine and an ever increasing number of consumer/food goods. The field has become a worldwide market worth an estimated USD 1 trillion and is projected to grow at a rate of 16.5 percent through 2020 (1).
Nanotechnology is a generic term for applications that work with matter that is so small that it exists in the atomic and molecular realm. At this size, the substance’s physical, chemical and biological properties are different from what they were at the micrometer and larger scales. By harnessing these new properties, researchers have found that they can develop materials, devices and systems that are superior to those in use today and that enhance our lives in almost limitless ways. Nanotechnology currently is being used to strengthen the material used in golf clubs and bicycle frames, to create stain- and water-repellant clothing and to produce wear-resistant paints and coatings. The table below illustrates some of the industries and hundreds of consumer products in which nanotechnology is already in use - ranging from automotive, chemical, electronics, medicine and textiles.
As with practically all scientific breakthroughs, nanotechnology carries both risks and rewards. While it appears almost certain that the rewards will greatly outweigh the risks, attention must be paid to possible dangers to the well-being and the potential of human latent bodily injury from this new technology. The Project on Emerging Nanotechnologies grouped products according to their potential exposure pathways into the human body from a theoretical perspective, and according to each product’s intended use. Based on the study, the number of consumer/industrial products that had the potential for resulting in bodily injury and occupational disease via transdermal, ingestion and inhalation exposure are 496, 129 and 212, respectively (2).
As optimistic as researchers may be, however, responsible decisions must be made regarding nanotechnology’s development and use. Growing evidence suggests that nanoparticles - the basic building blocks of nanotechnology and the tiniest materials ever engineered and produced - may pose environmental, health and safety risks. As such, it appears that the industry is currently caught between stages 2 and 3 of the insurance coverage cycle below:
1. Early study period, currently underway, where insurers and reinsurers study the issue
2. Fear phase, frequently accentuated by unfounded but terrifying rumors. This stage is expected to be short, given the generally benign nature of nanotechnology products
3. Mature phase, where cover routinely is provided either within conventional products or on a standalone basis.
The (re)insurance industry has a major role to play in helping society capture the benefits of this technology by helping to spread the risks. As it stands today, most global (re)insurers do not differentiate or exclude risks from nano-products. As a result, many in the industry acknowledge that insurance policies and reinsurance agreements in place may already be covering these risks. Rating agency, A.M. Best, in its 2013 briefing, “Emerging Technologies Pose Significant Risks with Possible Long Tail Losses,” identified the immediate as well as long latent concerns of nanotechnology - even going as far as equating its potential industry impact to asbestos. Nanotechnology risks are covered under a wide variety of covers, including general liability, products liability, workers compensation, professional liability, employment practices liability and directors and officers liability, exposing a broad swath of the industry.
Consequently, if the (re)insurance industry is to continue to support the myriad positive uses of nanotechnology while not incurring major long-term losses, it must have a thorough understanding of how nanomaterials are produced, stored, used and discarded. In addition to the identification and modeling of nano-product accumulations (and their subcomponents throughout the supply chain) on a property/casualty portfolio basis, it also is essential for carriers to monitor, manage and control their own exposures. Since losses from nanotechnologies have not materialized, carriers will need to contemplate and integrate an exposure-based modeling approach. Otherwise they could be accumulating multiple years of losses and reserves emanating from the next asbestos-like scenario on their books without realizing it.
As is the case with most emerging areas of risk, nanotechnology challenges insurers and reinsurers with many unknowns. These challenges are further complicated by the fact that few risk-related forecasts have been scientifically confirmed. Many industries are extremely optimistic about the opportunities associated with nanotechnology. If they are not currently exploring its potential, they are likely to do so in the very near future. Because (re)insurers play such a critical part in enabling new and beneficial technologies, it is essential that they work together with manufacturers, the government, scientists and regulatory agencies to identify and quantify nanotechnology’s risks. Public response to this new technology, as well as the legal climate, will depend upon how much accurate information is available.
1. MarketWatch Inc.