While still in its infancy, nanotechnology is poised to revolutionise the world of technology. But what are the risks associated with its development and are insurers and reinsurers ready? ask Harry Oellrich and Sandy Hauserman.
Many scientists view nanotechnology as having the potential to be the revolutionary technology of the 21st century, much as plastics were a pervasive and revolutionary product of the last century. Some even go a step further, speculating that nanotechnology could revolutionise today's society much as the Industrial Revolution advanced society in the 19th and 20th centuries.
As enablers of innovation, insurers and reinsurers have always had a positive role to play in facilitating technological advance by allowing the innovators to manage the risks inherent in developing new and better ways of thinking about, making or doing things. From the early days of marine exploration to the first satellite launches, insurers have played a key role by providing a safety net which encourages the creative juices to flow.
So what is nanotechnology? It is defined by the United States National Nanotechnology Initiative as "the understanding and control of matter at dimensions of roughly 1 to 100 nanometres, where the matter takes on unique properties that enable novel applications." Nanotechnology entails the manipulation of matter that is so small that it exists only in the atomic and molecular realms. As a point of reference, 1 millimetre is equivalent to 1,000,000 nanometres, which in turn is 10,000 times smaller than anything that can be seen by the naked eye.
At this size a substance's physical, chemical and biological properties are frequently very different than they are at the micrometer and larger scales. By developing processes to harness these characteristics, researchers are finding that they can develop materials, devices and systems that are superior to those in use today.
There are some key areas that will benefit by the surge in nanotechnology development: manufacturing, the environment, medicine and information technology to name a few.
In manufacturing, products can be built with superior strength and decreased weight and with unimagined miniaturisation. An auxiliary benefit being that nanotechnology-driven manufacturing will not require the utilisation of as much raw materials, consequently causing fewer types and amounts of waste products than previous production methods.
In terms of environmental impacts, nanotechnology-based processes promise the potential for higher agricultural yields, diminished pollution, renewable energy resources and less expensive water filtration systems. Additionally, nanotechnology promises to help the environment by creating and enhancing sensors for detecting biological and chemical contaminants, enhancing waste site remediation and treatment, and through a measurable reduction of global energy demands.
Some of the most promising benefits have been in the areas of health and medicine where methods of detecting, preventing and treating various diseases and conditions can be improved with nanotechnology.
And in terms of IT, nanotechnology will allow for smaller storage devices and faster processors that will operate on less power than today's computers. Benefits from any technological advance are inevitably accompanied by associated risks, some anticipated and others not. At present there are a limited number of products in the marketplace containing engineered nano materials, however given the pace of nano development this will not be the case for very long.
Entering the unknown
Certain attributes of nanoparticles do create a number of unknown exposures. These include the extremely small size of the particles, their increased reactivity and conductibility, and the routes of exposure that they can unlock.
Exposures could emerge in many insurance product lines, most notably so in health, safety, occupational and environmental coverages. Predicting how and whether these risks will manifest is difficult, however, as there is little (if any) information currently available from which to make such determinations. Present thinking is that nanoparticles may be able to enter the body through routes impenetrable by larger particles and then enter the circulatory system delivering drugs specifically to diseased cells. But what then happens to the nanoparticles is unknown. Will they harmlessly dissipate or will they go on to wreak havoc in the body? These and other questions need to be resolved if nanotechnology is to live up to its promise.
Given their unique properties, especially their increased reactivity and conductivity, early safety concerns are focusing on whether nanomaterials could result in fires or explosions. Similarly, as nanomaterials behave differently from larger particles, questions have arisen about whether they can pollute the water supply or damage crops during processes that release these particles into the air, soil or water.
With respect to the populations most likely to be impacted in the early stages of new nanotechnologies, the major health and safety concerns will likely be to researchers in laboratories and to production staff that will be exposed during the manufacturing of the nanomaterials themselves. Consequently, those in such occupations must be aware of the potential hazards of using materials that have unknown properties, and they must take whatever measures they can to mitigate such risks.
Nanotechnology risks are covered under a wide variety of insurance covers, including products liability, worker's compensation, environmental liability, professional liability and general liability. Establishing direct relationships and definitive conclusions between any exposure and resultant health and environmental effects may take years. In the meantime, it is still too soon to make broad and sweeping decisions about exclusions of nanotechnologies from these coverages, primarily because:
- Exposure to the general public is still low;
- The various nanotechnologies encompass a broad array of activities, without a uniform description and having very different risk characteristics; and
- There is significant diversification between the various nanotechnologies within most insurance portfolios which has the effect of alleviating adverse selection and any accumulations due to the differing technologies.
Insurance coverages for nanotechnology are likely to evolve in a similar manner to the way they have for other new and evolving technologies. Going back to the origins of modern insurance, the first policies written were for ocean marine, reflecting the dominant form of travel and commercial transportation, which was by sea. As transportation of goods evolved internally via canals and roads, inland marine policies evolved to reflect the new risks posed by inland transportation. Ultimately, the final result was a wide variety of covers in the inland marine field, many of which - like accounts receivable and electronic data processing - bear little resemblance to their origins.
As is the case with most emerging areas of risk, nanotechnology challenges us 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 will likely do so in the near future. Because insurers and reinsurers play such a critical part in enabling new and beneficial technologies, it is critical that they work together with manufacturers, governments, scientists and regulators to identify and quantify nanotechnology's risks.
Managing the unknowns associated with nanotechnology will be analogous to gauging the risks associated with environmental liability or employment practices liability, for example. Standard, affordable coverage will eventually be available. In the interim, by using claims made forms and establishing appropriate deductibles and limits commensurate with unknown risks, insurers and reinsurers can mitigate their potential losses and still participate in, and encourage the development of, this exciting new market.
Harry Oellrich is worldwide cyber, technology and intellectual property practice leader and Sandy Hauserman is senior vice president and worldwide environmental specialty practice leader for Guy Carpenter & Company.
Emerging Risks - The four up-and-coming areas of nanotechnology
1) Buckyballs - molecules containing carbon atoms that are bound together into a hollow sphere. Potential uses for buckyballs involve creation of nanodevices capable of entering cells or moving easily through the bloodstream, thereby enabling efficient treatment to parts of the body not easily accessible otherwise.
2) Nanoparticles - tiny particles consisting of a single element or compound. What makes nanoparticles interesting and useful is that they contain properties different from the bulk material from which they were derived. They can be used to increase material strength, provide impervious and slippery coatings, and improve energy transfer in solar cells.
3) Carbon nanotubes - composed of carbon atoms bound together into long thin tubes less than 2nm in diameter combining great strength with dramatically enhanced conductivity. Uses for them include enhanced design of semiconductors, chemical and genetic probes, and field emission devices such as flat panel displays.
4) Quantum dots - nanosized crystals that emit light after an outside source, such as UV light, is shone on them. Generally considered to be inert in the body, they can therefore be very useful in tagging proteins and nucleic acids in the body without the need for undertaking more invasive techniques.