November 14, 2006
Nanotechnology:
The Plastics of the 21st Century??
Harrison D. Oellrich
Managing Director
Worldwide Cyber Technology & Intellectual Property
Practice Leader
Agenda

Introduction to Nanotechnology
– What is nanotechnology?
– Significance
– Applications

The Associated Risks
– Occupational, environmental and consumer
– (Re)insurance concerns

The Actuaries Role
– What (re)insurers need to know
– How you can help your employers achieve their goals

Q&A
Guy Carpenter
2
An Answer To Many of Our Prayers?

U.N. World Resources 2000 report on the 50 year outlook:
– World population ↑ 50 %
– World economic activity ↑ 500 %
– Global energy and materials consumption ↑ 300 %

“(Nanotechnology) holds the answer to most of our
pressing material needs in energy, health,
communications, transportation, food, water, et cetera”
– Richard Smalley, Professor Rice University, Nobel Laureate

Insurance = Enabler of technologies
Guy Carpenter
3
The Potential:
An Introduction to Nanotechnology
What Is Nanotechnology?


The term ‘nanotechnology’ is derived from the Greek word
‘nanos’ or ‘dwarf’.
– 1 millimeter = 1,000,000 nanometer
"Nanotechnology is the understanding and control of
matter at dimensions of roughly 1 to 100 nanometers,
where unique phenomena enable novel applications."
– United State’s National Nanotechnology Initiative (NNI)
Guy Carpenter
5
Achieving Nanosized Particles

2 general processes
– “Top-down”:
– “Bottom up”:

Deliberate manipulation of
matter by certain chemical and/or
physical processes to create materials
with specific properties that are not
displayed in their larger forms
Use of manufacturing processes
such as milling or grinding to produce
nano sized particles
Nano-sized particles exhibit drastically different or
superior properties
Guy Carpenter
6
The Science Behind the Marvel

As an object decreases in size, the ratio between
surface area and volume increases.
– Surface molecules are extremely reactive

Classical physics breaks down at 50nm
– Objects take on different chemical, biological and
physical properties provoking altered optical, magnetic
and electrical properties
Guy Carpenter
7
Four Promising Nano Materials

Buckyballs
– Molecules containing carbon atoms bound together in a hollow sphere
– Can enter cells as they pass easily through the blood stream

Nano particles
– Tiny particles consisting of a single element/compound
– Contain properties different from bulk material from which they were
derived

Carbon Nano Tubes
– Carbon atoms bound in long thin tubes
– Enhanced conductivity / strength

Quantum Dots
– Nano sized crystals
– Emit light after light is shone on them
Guy Carpenter
8
Key Opportunities and Benefits of
Nanotechnology

Economic
– 15 % of all global manufacturing output in 2014.
– Will add $1 trillion to the world economy by 2015 – Louise Valle, Chubb
Corp.

Manufacturing
– Miniaturization, intrinsic production, reduction of waste materials

Environment
– EPA: potential to reduce worldwide energy consumption by 14.6%
– Can eliminate toxic waste at its source

Medicine
– Poised to revolutionize the ways that we detect, prevent and treat various
diseases and medical conditions.

Research
– 2005 NNI R&D spending already nearly $1.1 billion
Guy Carpenter
9
Irrational Exuberance??

Even if overstated all must agree that
opportunities in this space are real and significant
Guy Carpenter
10
The Future Is......

Which products utilize nanotechnology?
– Some 200 consumer products presently on the market
YES
YES
YES
YES
NOW!!!
Guy Carpenter
11
The Risk:
Understanding the exposures and risks
from an (re)insurance perspective
Risk Exposures

Occupational
– Source:

Manufacturing, transportation, storage, use and discard of
particles
– Concern:

Lack of protection, monitoring, filtration
– Coverage areas:

Workers compensation

This is where the early health and safety concerns will arise:
– Researchers
– Scientists
– Other lab / production workers
Guy Carpenter
13
Risk Exposures

Environmental
– Source:

Widespread applications → water basin, soil, air circulation
– Concern:

Complete penetration, concern over new non-biodegradable
pollutants
– Coverage area:

Environmental liability
Guy Carpenter
14
Risk Exposures

Consumer
– Source:

Skin→ bloodstream, lung→ bloodstream, ingestion, drug
administration
– Concern:

Penetration of brain membrane, disruption of immune system,
unintended flow of particles throughout body, etc..
– Coverage areas:

Product liability
Guy Carpenter
15
Major (Re)insurance Concerns

Insufficient research, knowledge = major uncertainties
– No past data
– Unforeseeable future

Unanticipated side effects

The asbestos parallel

Long tail, chronic concerns
– Cumulative loss nature
– Extremely broad spectrum of application
– Revolutionary rather than evolutionary
Guy Carpenter
16
(Re)insurance – Innovation Connection

Vehicle for bringing safe yet effective innovation to the marketplace
– A certain social responsibility involved
– Filters new risks and developments to general public

Must stay cutting edge to protect customer
- Enabler of technology
Guy Carpenter
17
The Coverage:
Helping Our Employers Achieve Their
Goals
What Do (Re)Insurers need to do?

Insurers
– Understand the technology and its processes
– Understand the risks
– Do the research into plausible and critical risks
– Begin to formulate products and coverage

Reinsurers
– Understand the technology and its processes
– Understand the risks
– Become comfortable with the industry
Guy Carpenter
19
Why Should The Insurance Industry Care?

A win–win scenario :
1) Insurance coverage allows evolution of the technology, all
mankind benefits
2) Establishment of coverage products for nanotechnology, new
portfolio of business generated
Guy Carpenter
20
Why General Exclusions Are Not The Answer

Nanotechnologies cover a very broad field with far from uniform risk
characteristics.

Positive diversification effect for insurance portfolios based on variety
and spread across industrial segments.

The exposure of the general population to nanotechnologies is still
very low.
Guy Carpenter
21
Risk Awareness

Bring discussion to the front line between insurers and reinsurers

Help determine how underwriters and risk engineers should deal with
critical issues

Consult underwriters on unavoidable uncertainties of risks
– No reliable probability curve
– No reliable severity estimates
Guy Carpenter
22
Risk Identification
Can we underwrite the risks?

Construct clear picture of risk landscape for clients

Develop and evolve contract wording
– Creation of new vocabulary and concise definitions
– Specify certain exposures

Facilitate research and risk awareness
– Aid primary in decisions
– Educate reinsurers
Guy Carpenter
23
Risk Management

It is everyone's responsibility to stay abreast of emerging exposures
– Wait and see attitude is strongly unadvised
– Close monitoring of risks

Actuaries can/should be an integral component of teams set up to
study/monitor/guide their companies response to Nanotechnology (or
any other emerging exposure).
Guy Carpenter
24
THANK YOU!
QUESTIONS?