Nanotechnology
IFCS – Intergovernmental Forum on Chemical Safety
Forum IV
The small and the risk –
A view from the re/insurance industry
Dr. Thomas K. Epprecht
Products, Swiss Reinsurance Company
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Dakar, 16 September 2008
Key points
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 2
1.
Coping with (emerging) risk
2.
Learning from asbestos
3.
Risk governance and insurability, conclusion
Part 1
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 3
1.
Coping with (emerging) risk
2.
Learning from asbestos
3.
Risk governance and insurability, conclusion
The unknown, novel makes…
…either anxious…
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 4
...or rich…
…or curious…
Slap me again
and I’ll see you
in court!
…and always a bit perplexed
Strategies to cope with novelty
Considering novelty and change
Starting point is based on incomplete information:

Uncertainty: Apparently a priori elevated risk potential

Insurability: Lack of history, i.e. statistical (loss-)data

Knowledge gaps: Conclusions by analogy are inappropriate
Are we able to anticipate novel risks against the background of familiar
risk perception patterns?

Information is a prerequisite for risk transfer
Experience based approach (rating based on ‘burning costs’) to be
amended by anticipatory approach (exposure analysis, scenarios)
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 5

How can creeping change be (1) perceived and (2) considered if knowledge and information are not conclusive?
Anticipatory approach
to nanotechnology
Emerging risk drivers:


Scientific-technical quantum leap


Commercial and societal significance


High complexity and interdependencies, ‘long tail’


Subtle change of natural or man-made environment


Socio-political, economic or regulatory adjustments


Modified risk perception or –preparedness


Insurance principles* not (yet) applicable
*
*
*
*
Randomness
Assessability
Mutuality
Affordability
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008

Goal of proactive risk appraisal: Avoid surprises!
Page 6

Challenge: Quantify uncertainty, identify point in time for action
Part 2
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 7
1.
Coping with (emerging) risk
2.
Learning from asbestos (and lack of information)
3.
Risk governance and insurability, conclusion
How much
evidence needed
for action?
Example Asbestos:
40 – 100 years
delay
Options to act
1895

Risks
become
apparent

Eternit
patent
1939

1918-1930
1900


First
recognized
asbestos
fatality in
London
Scientific
publications
determine
cause for
asbestosis

Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Action
First claims
for occupational
disease
1975-1985
Asbestosis

recognised
as occupational

disease (CH)

1985-2005
US liability
tightened

Rising media
interest
Sweden
bans asbestos (1975)

Abandoning
asbestos

New bans,
norms,
orders

EU bans all
forms of
asbestos
(1999)
50ies and 60ies


> 1933
Signals
Page 8
1900

Asbestosis
listed as
occupational disease
Workers’
mortality
correlates
with exposure
Time
First asbestos-free
Eternit

“Outrageous
Misconduct”
published
(USA 1985)

Switzerland
bans asbestos (1989)
Reaction
Room for action
Why did we
mistake, or
Risk indicators
Anticipatory approach
is opening up room for action
The problem with evidence:
Right point in time for action?
Opportunity
Risk
Impact on non-target bacteria unknown. Non-target
bacteria are important for ecosystem balance.
Dr Vicky Stone, Toxicologist, Napier University Edinburgh, UK
EPA: Regulated as a pesticide. Environmental safety of
nano-silver must be proven before marketing...
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 9

…if marketing makes reference to biocidic effect
The problem with evidence:
Sufficient information?

Nature Nanotechnology, 20 May 2008
Carbon nanotubes introduced into the abdominal cavity of
mice show asbestos-like pathogenicity in a pilot study

Science, 20 May 2008
Nanotechnology‘s public health hazard?

BBC News 20 May 2008
‚Asbestos warning‘ on nanotubes

New York Times, 21 May 2008
In study, researchers find nanotubes may pose health risks
similar to asbestos

EPA Today, 21 May 2008
Study comparing nanotubes to asbestos prompts call for EPA,
[Capitol] Hill action

Internet order of 10g MWCNT, 29 May 2008
Shipped in envelope as „Carbon
Nanomaterials (non toxic powder…“)
Safety data sheet: No known hazards
Page 10
Conclusion from Nature Nanotechnology paper:
Information and precaution

No reason to overinterpret and generalise
– Hazardous material properties of MWCNT are not a „nano“-problem
– Inhalation / aspiration not yet tested, the „Donaldson“ study gives
reason to follow up on hazards and identify knowledge gaps.

Specific phenomenon was foreseeable
– Asbestos fibre-like shape.
– But: Asbestos is a reference case for what we all made wrong.
– Continuous reconsidering & sharing of information on safety measures.

Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 11
„W“-Questions pending
– Who is exposed to exactly what and how long in which quantities?
– What are the precautionary measures to mitigate exposure?
– Where do MWCNT go to?
Part 3
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 12
1.
Coping with (emerging) risk
2.
Learning from asbestos
3.
Risk governance and insurability, conclusion
The IRGC model
Need for comprehensive
Risk Governance
Passive nanostructures
System components with
steady functions, e.g. particles, wires, tubes, layers;
improve existing materials
http://www.irgc.org/IMG/pdf/
An_introduction_to_the_IRGC_
Risk_Governance_Framework.pdf
Present focus
PreAssessment
Early Warning
Framing
Baseline
~2008
Active nanostructures
System components with
evolving functions during
operation, e.g. reacting
sensors or targeted drug
delivery, cancer therapy
Future focus
Management
Law
Transfer
Insurance
~2015
Active nanosystems
Communication
Trust
Say
Appraisal
Science
Perception
Supramolecular structures:
Synthesis by bio-assembly,
synthetic biology;
technological conversion
Valuation
Evidence
Acceptability
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 13
Deciding
Assessing
Liability and measurability
limit insurability

Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 14

Extent of liability limits risk appetite and preferred capital allocation

All losses

Losses for which
someone is liable

Insurable losses

Insured losses

Cover limitations /
risk selection
if insurability
criteria* not met
*
*
*
*
Randomness
Assessability
Mutuality
Affordability
Need for selection de facto limits insurability to “best in class”
Selection criteria: Risk quality, risk management, information
Summary

Nanoscale is not new

But new is the possibility to
visualize, characterize and
engineer tailored materials,
devices and systems in the
approximate size range of
1 – 100 nm
Nanomaterials with entirely novel
properties and functions, as well as
hazards:
Highly reactive and mobile in the
human body and the environment
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 15


No
such thing as the
nanotechnology
Enabling key technologies: All
industry segments affected
“Nanoness”
not defined
What is “nano”, what is a “nano”specific risk is not conclusive
Gaps: No long-term experience;
size-related hazards and toxicology
not systematically examined; no
classification; criteria for adapted
regulatory framework missing
Dealing separately with nanotechnologies (legal and insurance) in a
general way is not an option.
Distinction criteria for proper selection are key for enforceability.
Epilogue
„A new technology always presents opportunities and
threats; societal actors and individuals need to decide
whether the disadvantages outweight the potential
benefits. This is not always easy in a pluralistic society,
and one that calls for risk expertise, respect, tolerance
and a sense of proportion.“
Concluding remarks at Swiss Re‘s 2nd Nanotechnology Conference
in July 2006 at the Swiss Re Center for Global Dialogue
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 16
Emerging Technologies ‘Nano’ and ‘Gene’ @ Swiss Re
contact:
Dr Thomas K Epprecht, Director
Products, Risk Engineering Services Casualty
Swiss Reinsurance Company
Mythenquai 50/60
CH-8022 Zurich
Phone: +41 43 285 2063
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 17
Fax: +41 43 282 2063
E-mail: Thomas_Epprecht@swissre.com
Discussion
Plaintiff bar
or
industry
or
NGO
or even
insurer?
Everything
under control?
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 18
Facts are facts,
but reality is
perception
Somebody
to blame?
Reservefolien
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 19
Adapted from Linkov et al. 2008
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 20
Good practice:
Risk framework documents
Risk: A question of perspective
“Risk” = potential deviation from expected as a consequence of disruptive
processes (negative deviation) or extraordinary success (positive deviation)
Dynamic or speculative:
Entrepreneurial view of risk
anticipates deviation
Threat
negative deviation
Static or precautionary:
General view that risk should
Nanotechnology
be avoided or prevented
Dr Thomas Epprecht
© Swiss Re 2008
Page 21
Risk
Opportunity
Expectation
positive deviation
.
RM approaches:
Optimize potential loss or return
Insurance perspective
Bank / corporate perspective
Threat
Opportunity
negative deviation
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 22
positive deviation

Optimize capital allocation

Optimize investment

identify loss potential

identify market potential

loss distribution and
diversification crucial

net profit and
value added crucial
Control loss ratio
Control costs
“Emergence” – back to the future
Think 10, 15, 20 years ago: What was not there yet?
Informationtechnology
Communicationstechnology
Service and
commerce
Consumer goods
Medicine
Politics
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 23
Sports
Riskissues
Which knowledge gaps you
were not aware of at that time?
Technologies
Summary
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 24

Novel: Technology to visualize, characterize and
engineer tailored materials, devices and systems in
the approximate size range of 1 – 100 nm

Nanomaterials with entirely novel properties and
functions, as well as hazards: Highly reactive and
mobile in the human body and the environment

Big: Most industry segments affected (surface
materials and paints, pharmaceuticals, cosmetics,
electronics, energy, food processing, etc.)

Rapid development: Worldwide revenues expected to
exceed USD 1 trillion by 2015

Gaps: No long-term experience; size-related hazards
not systematically examined; adapted regulatory
framework missing
We foster dialogue and governance
on Nanotechnology
Swiss Re …

… supports multi-stakeholder
endeavours to define, assess, and manage
nanotech risks

… fosters risk dialogue to prevent a
polarized debate and enable risk
governance by adequate and adapted
precautionary efforts

… monitors the scientific evolution
to identify early loss indicators
and quantify the liability exposure

… promotes the development of tailored risk
management principles and adaptive
insurance cover concepts
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 25
Publications
Sponsoring & Memberships
Stakeholder Dialogues
RM or how we can cope
with novelty and change
To anticipate means:
…perceive change
How old is this woman?
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 26
1/6
To anticipate risk
means to perceive
change.
RM or how we can cope
with novelty and change
To perceive means:
…watch carefully
2/6
To anticipate risk
means to perceive
change.
To perceive means
to watch carefully.
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 27
RM or how we can cope
with novelty and change
To watch carefully means:
…distrust familiar patterns
3/6
To anticipate risk
means to perceive
change.
To perceive means
to watch carefully.
To watch carefully
means to distrust
familiar patterns.
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 28
RM or how we can cope
with novelty and change
To watch carefully means also:
perceive hidden patterns
4/6
To anticipate risk
means to perceive
change.
To perceive means
to watch carefully.
To watch carefully
means to distrust
familiar patterns,
or to perceive
hidden patterns.
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 29
RM or how we can cope
with novelty and change
To mitigate risks means:
…focus properly
5/6
To anticipate risk
means to perceive
change.
To perceive means
to watch carefully.
To watch carefully
means to distrust
familiar patterns,
or to perceive
hidden patterns.
To mitigate risks
means to focus
properly.
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 30
RM or how we can cope
with novelty and change
To quantify risks means:
considering the Worst Case
6/6
To anticipate risk
means to perceive
change.
To perceive means
to watch carefully.
To watch carefully
means to distrust
patterns,
or perceive hidden
patterns.
To mitigate risks
means to focus
properly.
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 31
“Burning cost”
quantification
To quantify risks
means considering
the Worst Case.
Options and limits of insurability

Need for selection does limit insurability to “best in class”
Selection criteria: Risk quality, risk management, information

Options for risk mitigation / loss financing
– Autarky (in case of “total safety” or incredible wealth)
… safe airplanes can crash … safe liners can sink …
– Solidarity (insurance model, preventive financing)
Requires compatibility of interests between insurer & insureds
– Auxiliarity (fund’s model or enforcement, limited ressources)
Requires common interests of involved partners
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 32

Liability limits insurability
Extent of liability limits risk appetite and preferred capital allocation
of insurance industry
Liability insurance
Basics of insurability
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 33

All losses

Losses for which
someone is
liable

Insured losses

Cover limitations /
risk selection
if insurability
criteria* not met
Need to limit
exposure
*
*
*
*
Randomness
Assessability
Mutuality
Affordability
Risk perception

Perception is taken, not given
– not unbiased, but contextually objective
– depends on personal experience, education, culture;
but also on values, ethics, interests.
Cartoon by Mordillo

Risk perception, also amongst experts, is not uniform;
Common ground may only result from debate:
“Upstream framing assumptions…
– …influence the way in which risk assessment is conducted
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 34
– …set the agenda for deliberate decisions and conclusions.”
Erik Millstone
“…set the agenda for
deliberate decisions and conclusions.”
RISK = HAZARD + EXPOSURE + PERCEPTION
Lesson from previous technology debates:
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 35
The key thing is not whether or not a technology is useful
but whether it is perceived as such.
Decisions require dialogue
!
Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 36
“Thus the choice is not between making, or not making,
upstream framing decisions, but between doing so
implicitly and covertly or explicitly and legitimately.”
Erik Millstone, Director Social Policy Research, University Sussex, at Swiss Re 2004.

Successful stakeholder involvement can help to widen
perspective and avoid surprises.

Requires addressing uncertainties openly.

A framing decision is e.g.: Dealing separately with
nanotechnologies (legal and insurance) is not an option
Reason: What is “nano”, what is a “nano”-specific risk is not conclusive
Summary

Nanoscale is not new

But new is the possibility to
control the targeted modifi-cation
of nanoscale structures in order
to engineer tailored materials,
devices & systems with entirely
novel properties and functions

Nanotechnology
Dr Thomas Epprecht
© Swiss Re 2008
Page 37

No such thing as the
nanotechnology
Enabling key technologies: All
industry segments affected
“Nanoness” not defined
What is “nano”, what is a “nano”specific risk is not conclusive
Novel properties of nanoobjects
– Highly reactive and mobile
– Potentially harmful if released
– Fundamentaly new properties
– Quantum effects
New, complex and unclear –
we cannot learn from the past
– No long-term experience
– Not systematically examined
– Few toxicology assessments
– No classification, terminology
There is plenty of room at the
bottom for uncertainty, need
for information, fight, lost and
taken chances and DIALOGUE