Gen Re Suggests Foresight Handling of Nanotechnologies and "360-Degree-Risk-Monitoring"
Gen Re an international reinsurance company highlights the issue of liability insurance of nanotechnologies. The article "Handling Nanotechnologies with foresight in the context of Liability insurance" describes potential risks of nanotechnologies from the perspective of insurance companies and shows strategies for foresight handling. The report recommends explicitly a "360-degree-risk-monitoring" tool.
Potential loss exposure in liability lines of business
Key Words: liability, nano, 360-degree-risk-monitoring:
Because of the global presence of nanomaterials in numerous products and industries, many people could be harmed by them – a scenario which would make the liability insurance industry vulnerable to an enormous potential loss exposure. In that view, the impact would be felt by virtually all liability lines of business:
- CGL (Comprehensive General Liability) insurance
- Product liability insurance
- Environmental liability insurance
- Product recall
- Workers Compensation
A forward-looking approach to nanotechnologies within the scope of liability insurance
Considering the complexity of nanotechnologies, the insurance industry is well advised to address in detail the main risk issues, including its own risk provisioning, and to develop actuarial mechanisms that positively support nanotechnologies. At present, however, nanotechnologies are only occasionally approached at the necessary level of detail from an insurance perspective – a situation that is not limited to Germany. In the insurance industry it`s called “a waiting period”. When looking at the harmful effects to people and the environment, a comparison between nanomaterials and asbestos is premature and has not been validated by scientific research. Nevertheless, recognition of the effects of exposure to asbestos fibers, from initial warnings to international precautions, should be a warning. Nanotechnologies should be taken into account when underwriting now. It is essential to initiate a process that systematically deals with these technologies and their potential risks from an insurance perspective. A first step should be to create transparency in the insured portfolio. How many policyholders and what kind of nanomaterials are involved? An efficient risk assessment can also be made by means of risk questionnaires on nanotechnologies.
Portfolio-analysis and Claims-made principle to prevent long-tail risks
Liability insurers with no or insignificant exposure in their portfolios do not need to take any action at this moment in time. Regular monitoring, however, is a reasonable precaution. Liability insurers with portfolios where a significant number of insureds are in contact with nanotechnologies should take the next step and implement a risk monitoring and analysis process. This means monitoring and analyzing developments in research, regulation and public perception that concern areas of nanotechnology risk relevant to their insured parties. Ultimately it means getting to the bottom of the issue of where risks can be expected to arise with a high degree of probability and/or where they already exist. However, the implementation of such a process is time-consuming and costly due to the demanding requirements and complexity.
Source: Gen Re
Further Information: info@innovationsgesellschaft.ch
The article "Handling Nanotechnologies With Foresight in the Context of Liability Insurance" (PHi 6/2012) is here available (In English; Pdf, 378 KB).