Nanotechnology: Introduction to the Science, Regulation and Emerging Risks

Written by Maryann Taylor, Partner, D'Amato & Lynch, LLP
[email protected] 

The morning began with a presentation by Thomas Bernier and Lawrence Mason, partners with the firm of Goldberg Segalla on the rapid technological progression, commercialization and pervasiveness of nanotechnology and the associated risks and challenges they pose for the insurance industry.

Nanotechnology is engineering at molecular or atomic level of particles and structures as small as one ten-thousandth the diameter of a human hair, one thousandth the size of a red blood cell, or one thousandth the width of a sheet of paper. The practical application of this technology is diverse and already prevalent in medical technology, environmental, and personal care products. It is poised to transform the manufacturing processes through the development of lighter and stronger materials with new products and applications being developed at a rapid pace.

The revenue trends for nanotechnologies are staggering with approximately 1600 consumer products on the market now. Nanotech revenue has increased six-fold between 2009 and 2016 with an estimated $48.9 billion in sales by 2020 and a compound annual growth rate of 18.7%.

The grave concern of this proliferation and wide-scale use of nanomaterial is that the toxicity and environmental impact of nano is not well known. Nonetheless, there is a growing body of evidence that suggests the potential of adverse health effects stemming from exposures to nanoparticles. By 2020, it is estimated that 6 million factory workers will be handling nanoparticles worldwide with 2 million factory workers handling nanoparticles in the USA.

Calls for tighter regulation and government oversight of nanotechnology have resulted in the establishment of the Nanotechnology Environmental and Health Implications (“NEHI”) working group which coordinates and provides an information exchange among Federal agencies that conduct nanotechnology research and are responsible for regulation of nanomaterials and products that contain them. There are, however, huge gaps in the regulatory oversight by the various agencies and the science as to the impact on human health and the environment has simply not kept up with the innovation and the successful commercialization of nanotechnology.

All of this leads to the recognition by insurance industry of nanotechnology as an emerging risk which presents a host of unique issues that insurers must grapple with. From an underwriting perspective, nano represents a new technology that could significantly impact the risk profile of one or more target markets. Integration with other products coupled with the difficulty to access risk due to lack of historical data on frequency and severity, make it difficult to develop policy exclusions that are marketable.

From a claims perspective, it is difficult to assess coverage due to lack of legal guidance on interpreting current policy language. The likelihood of a claims explosion is real and just one scientific study and lawsuit away because of the wide-spread and wide-ranging applications. The panelist described the eerie and foreboding similarities of nanotechnology to asbestos and the many coverages that may be implicated. If the history of asbestos is any indicator, nanotechnology represents an enormous challenge to the insurance industry