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As technology continues to shrink, insurance concerns grow exponentially.

By  Scott Sinder and Anna Gergely

The world is shrinking, and nanotechnology may become the unseen revolution that proves the point once and for all. Companies such as BASF, Bayer, DaimlerChrysler, Hewlett-Packard, IBM and L’Oréal are among the pioneers in developing nanomaterials and products that contain them. Today, many other established companies and thousands of start-ups take advantage of the benefits offered by nanomaterials in their products. Nonomaterials are already heavily embedded in healthcare, personal care products and the energy and electronics sectors. And they have significant potential to revolutionalize the aerospace, wind and automotive industries. So what exactly is nanotechnology, and why should you care?

For starters, consider that one nanometer (nm) is a billionth of a meter. For a better sense of the scale, consider that a nanoparticle is to a football what a football is to the earth.

At nanoscale, the physiochemical properties of well known and commonly used materials may change, leading to unique new properties. The same material may have different properties at different nanoscales, further extending the scope of potential applications.

Properties of nanomaterials (including, in all likelihood, those yet to be discovered) will open doors to an endless array of new applications. Nanotechnologies will influence the way we produce and use energy, transform raw materials and design, manufacture and consume end products.

A 2011 Lucintel study estimates that the nanomaterials market will reach $6.1 billion by 2016. Lux Research says the nanotechnology industry (including nanomaterials and nano-enabled products) is expected to generate $2.5 trillion in 2015.

Despite this phenomenal growth, knowledge concerning the health and safety impact of nanomaterials is in its infancy. Many research projects have been commissioned in recent years to assess the potential hazards and risks associated with the use of nanomaterials. However, the different standards and methodologies used have not always led to comparable results. The lack of available data to identify and measure such risks over time adds to the challenge. For example, the long-term risks related to the inhalation or absorption of nanomaterials are particularly difficult to measure. Once inhaled, substances at nanoscale could penetrate lung membranes and reach blood vessels and from there travel to organs such as the brain or heart. Traditional studies may prove inadequate to measure such potential risks.

To manage the risks related to the use of nanomaterials, legislators in the European Union have introduced some sector-specific requirements. These include the obligation to use only authorized nanomaterials and to notify authorities about their use. Such requirements are generally introduced where health concerns are traditionally higher, such as when materials come in contact with food or cosmetics.

The European Commission, the executive body of the European Union, published a definition of nanomaterials in October—an important step toward clarifying their regulatory status (at least in the EU). The Commission recommendation defines “nanomaterial” as anything that is “a natural, incidental or manufactured material containing particles, in an unbound state or as an aggregate or as an agglomerate and where, for 50% or more of the particles in the number size distribution, one or more external dimensions is in the size range 1 nm-100 nm.” Although it is not binding and does not have worldwide application, the Commission’s definition is a noteworthy first step and could have a major impact on developing nanotechnology regulation around the world.

You and your clients face the challenge of assessing the risks associated with nanotechnologies at a moment when the understanding of their potential risks is incomplete. Nanomaterials have attracted significant attention from policymakers, focusing on potential health risks to workers and consumers, as well as environmental risks.

Some of you and your carrier partners may still consider nanotechnologies as a future challenge. In all probability, many of your clients already incorporate nanotechnologies into their products or their production processes (or are considering doing so). Your firm needs to understand these developments and their potential impact on clients’ risk management and insurance needs.

Nanotechnology insurance solutions are still being developed. While some insurers appear to be waiting, others are launching specific liability products for nanotechnology producers. The presence of nanotechnologies in a client’s products and production processes forces insurers to reassess the liability risks in their current policies and to review their own coverage under existing reinsurance agreements.

Insurance brokers should play a significant role in the development of the nanotechnology insurance market. You will have a significant competitive advantage if you have (or develop) the knowledge and ability to assess nanotechnology risks and their impact on specific industry sectors. The world is, indeed, getting smaller. Can your firm handle the heavy burden that a smaller world will require?

Sinder is CIAB’s general counsel. ssinder@steptoe.com

Gergely is director of Steptoe’s Environmental Health Sciences Group in its Brussels office. agergely@steptoe.com


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