Insurance, nanotechnology, and risk

I’ve been meaning to do something on insurance and the nanotechnology industry for a while so I’m thankful to have stumbled across this July 15, 2013 article by Anya Khalamayzer, which concerns actuaries, for Property Casualty 360°,

“An emerging technology can leave insurers covering risks they never contemplated,” states the Casualty Actuarial Society (CAS) in a statement on this revolutionary occupation [nanotechnology].

Parr Schoolman, a CAS fellow and senior managing director at Aon Benfield, explains that despite the lack of definitive data on the nanotech industry, an actuary’s ability to analyze a situation can help insurers develop a product to cover a futuristic technology that has arrived on society’s doorstep.

“Working with limited data is exactly the area where actuaries add most value,” says Alex Krutov, president of Navigation Advisors, in an email to PC360. “In general, the ability to provide solid actuarial risk analysis can also help accelerate societal progress by making possible the development and introduction of new technologies and products that otherwise might be considered uninsurable and too risky.”

I find this bit from the article  interesting,

Krutov says, “Medical applications of nanotechnology are very promising.  At the same time, health and other risks of specific products based on nanotechnology have to be properly analyzed before any insurance underwriting decision is made.  While actuaries are not expected to be experts on nanotechnology or medicine, they provide the general framework for this risk analysis.”

It seems to me the only way a nonexpert could establish a general framework for risk analysis, as Krutov suggests, would be to read some of the literature and get reports from people who do have expertise. One has to wonder though, at what point a threshold, whatever it might be, is passed and something becomes insurable. For example, there’s Chad Mirkin’s therapeutic skin moisturizer breakthrough in July 2012, mentioned in my Penetrating the skin barrier posting,

Researchers at Northwestern University (Illinois, US) have found a way to deliver gene regulation technology using skin moisturizers. From the July 3, 2012 news item on Science Blog,

A team led by a physician-scientist and a chemist — from the fields of dermatology and nanotechnology — is the first to demonstrate the use of commercial moisturizers to deliver gene regulation technology that has great potential for life-saving therapies for skin cancers.

At what point, once the treatments have passed through clinical trials, does the treatment or the doctor giving the treatment become insurable? From the article,

Because nanotechnology has only been available since the 1984, and due to the cutting-edge speed at which it is being developed, reliable data describing its effects is often outdated. Furthermore, Kingdollar [Charlie Kingdollar, vice president and emerging issues officer of General Reinsurance Corporation] says more than 60 percent of firms and universities fail to conduct toxicity tests on nanomaterial.

According to the United States Environmental Protection Agency (EPA), nanomaterials are effective precisely because their size allows them to enter the body in ways not typically found in other chemicals: for example, through the blood-brain barrier or by crossing cell membranes.

Kingdollar appears to be suggesting uninsurability while at the same time noting possible future loopholes should companies insure some form of nanotechnology-enabled therapy or product.

A little digging unearthed this Dec. 17, 2012 news item on Nanowerk (Note: A link has been removed),

The article “Handling Nanotechnologies with foresight in the context of Liability insurance” (pdf), published by reinsurance company Gen Re, describes potential risks of nanotechnologies from the perspective of insurance companies and shows strategies for foresight handling.

The article concludes that “In summary it must be noted that our goal as an insurance industry should support highly profitable nanotechnologies from an underwriting perspective, but without losing sight of the considerable risk potential. This can only be achieved through risk identification, risk monitoring and risk analysis. Simply waiting until risk materialises could have significant consequences for the insurance industry.

… align both of those goals — support for nanotechnologies and justifiable limitation of the potential financial risks for the insurance industry. A step in the right direction could be to contain the problem of late claims, which are inherent with these technologies, by employing the claims made principle.”

While I find the jargon a little difficult, it does seem that another loophole is being developed in that last line about “employing the claims made principle.”

For further investigation, here’s a link to the 10 pp. article Handling Nanotechologies With Foresight in the Context of Liability Insurance by Richard Wieczorek for Gen Re.


1 thought on “Insurance, nanotechnology, and risk

  1. R Johnson

    Charlie Kingdollar in the quote doesn’t suggest uninsurability of nanotechnology. He appears to be suggesting violation of safety regulations by universities and firms that don’t conduct toxicity tests on nanomaterial. Insurance shouldn’t pay for violations of safety regulations.

    Alex Krutov’s statement in the first quote is very general. Nanotechnology can be substituted with biotechnology or any emerging technology. His approach still requires obtaining reports from people with expertise in the technology. If safety testing is not done in over 60 per cent of cases as Kingdollar says, Krutov’s framework can’t be constructed. The 60 per cent figure seems improbable.

    Most applications of nanotechnology are not in medicine that Khalamayzer, Kingdollar and Krutov (second quote) mention. It’s improbable that nanotechnology is used in medicine without safety testing if the risk size suggests uninsurability.

    Part Schoolman seems to be suggesting insurability of nanotechnology. Alex Krutov suggests analyzing risk involved and doesn’t suggest insurability or uninsurability without analyzing specific products. Charlie Kingdollar’s words about toxicity testing seem to be suggesting risk. He doesn’t say uninsurability. The figure 60 per cent in his quote seems improbable. CNT’s and CNF’s are tested.

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