An Introduction to Nanotechnology for the Insurer – an Emerging Liability Risk

The emerging nanotech market carries with it potential long-term risks as well as huge possibilities; a concern for insurers?

What is Nanotechnology?

There is no agreed definition of "nanotechnology" (or nanotech). Put very simply, it is the study and manipulation of matter far smaller than the human eye can see; a nanometre is one billionth of a metre, which is about one hundred thousandth of the width of a human hair1. A DNA molecule and a silicon atom both measure 2nm, and the common cold virus measures 25nm. Nanotechnology, broadly, refers to the “engineering, measurement and understanding of nanoscaled materials and devices2”.

Developments in nanotech have possible applications for a vast range of products across all industries. For insurers, as for society as a whole, this emerging technology carries with it opportunities and risk in broadly equal measure. The risks and longer term consequences associated with nanotech are largely an unknown quantity, and development must be managed carefully.

Uses and Applications of Nanotech

Nanotech already has a large number of commercial applications, in products as diverse as beer, cosmetics and clothing. Smartphones use nanotech in a variety of ways. Other examples include plasters with a nano-coating of silver to help wounds heal more quickly, and a diet milk shake that contains nanoclusters of cocoa, which have greater surface area and give a more intense flavour without the need for added sweeteners.

New and exciting applications of nanotech are constantly emerging. For example, scientists in Paris are developing a nanoparticle solution which could be used in place of stiches to ‘glue’ wounds together, and scientists at MiT are developing a way of storing energy (such as from solar power) using carbon nanotubes.  A scientist at the University of Sheffield has made a giant poster that uses nanotechnology to absorb pollution; the poster is coated with microscopic nanoparticles of titanium dioxide, and when light hits them they react with oxygen, and wash nitrogen oxides out of the air.

Inevitably, however, there are risks associated with these new technologies.

What are the risks?

The risks of nanotech are largely unknown, and are subject to debate.  According to a 2004 report by Swiss Re3: “Nanoparticles are already contained in numerous products worldwide and occur in various applications.  There are indications that certain nanomaterials are a potential health hazard.  The danger is most probably not of an acute but of a chronic nature, and it could be some time before it manifests itself.  That is where the real risk for insurers lies …”. 

The properties of nanoparticles can be very different to the larger forms of the material they are made from. One of the benefits of nanotech is that with decreasing particle size, the ratio between mass and surface area changes; chemical reactivity is related to its surface area, so nanoparticles are more chemically reactive than their larger relatives. This may have enormous benefits in the fields of medicine and in combatting pollution. Equally though, some of the very features which make nanoparticles a useful tool may also greatly increase their toxicity, and also the ease with which the particles can disperse in air and water. The effect on humans, and living organisms more widely, of ingestion or absorption of nano particles is as yet unknown. Several cases have been reported in the US of acute reactions to exposure to nanomaterial containing nickel, a known allergen, and particular concerns have been raised about ultra-fine carbon particles and silica. At the same time, because nanoparticles present such opportunities, are relatively cheap, and can be manufactured in large quantities, industry is embracing them. They are already used in many consumer products. Despite this, nanotech remains largely unregulated, possibly because governmental bodies across the globe are struggling to keep pace with developments.

Many nanotech applications may, therefore, have widespread, but as yet unknown, toxicological effects and environmental impact.

The comparison with asbestos

Of particular concern, to insurers and to the public alike is the possibility that free nanoparticles of a specific length scale may pose health threats if inhaled, particularly at the manufacturing stage. Carbon nanotubes are currently the main area of concern, as these are a similar shape to asbestos fibres. Some scientific research has indicated potential toxicity of nanotubes: “Carbon nanotubes are potentially toxic to humans and that strict industrial hygiene measures should be taken to limit exposure during their manipulation4” . Studies in mice indicate lungs can become inflamed and that scarring can occur.

Industry and government are growing increasingly conscious of this, and are funding research into identifying particles that may pose a hazard to health or the environment, and how these risks may be quantified, and minimised, over the whole lifecycle of a given nanoparticle.

How can Insurers protect themselves?

If a product (or any of its component parts) is defective its manufacturer may be liable for damage under the Consumer Protection Act (CPA) or in negligence. Should adverse effects of nanotech products start to emerge many years from now, insurers may find themselves on the receiving end of a large number of claims, potentially of very high quantum.

Because the extent of the risk is virtually completely unknown, it is very difficult to plan against it.  Insurers, with a particular focus on product liability, employer’s liability, D&O and environmental impairment products, can still, however, take various steps to protect their position. The first step is for Insurers to seek to understand the processes involved in nanotech, and then inform themselves as to how, and to what extent, nanotech applications are used by their own Insureds. Insurers should consider asking certain specific questions of the Insured at the point of presentation of the risk and/or in the proposal form (formally or otherwise). In addition, relevant policy wordings should be reviewed with this type of risk in mind; consideration might be given to claims series clauses, greater use of claims made policies and careful use of policy limits and exclusions. 

1. according to the Institute of Nanotechnology

2. Lloyds Emerging Risks Team Report – “Nanotechnology  Recent Developments, Risks and Opportunities”. 

3. Swiss Re report – “Nanotechnology – small matter, many unknowns”.

4. “Respiratory Toxicity of Multi-Wall Carbon Nanotubes”, 2005, Toxicology and Applied Pharmacology. 

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.