Robert Blaunstein recently published an article in Insurance Networking News: “Unfamiliar Exposure: Nanotechnology deals in tiny particles, but its potential risk to insurers is sizable and nearly impossible to calculate.”   The article begins by noting the "enabling" role the insurance industry has often taken with new technologies. Dr. Blaunstein argues this "enabling" function is fulfilled by when insurance companies help businesses manage product risks. In order to play this role with the nanotechnology industry, Dr. Blaunstein argues insurers need to better understand nanotechnology and “have access to accurate data and information that permit a questionable evaluation of the probability and severity of losses.”  He also advocates government regulation over the use and disposal of harmful nanomaterials.

The article goes on to explain the insurance industry’s risk analysis regarding nanotechnology is lacking because of the: (i) large number of uses of nanomaterials in a “broad array of activities;" (ii) lack of existing data regarding specific risks posed by nanomaterials. Given these uncertainties, Dr. Blaunstein believes insurance coverage for the nano-industry will evolve in three stages:

Early Study Period. The insurance industry is currently in this stage, which is an effort to assess potential risks and insurance exposures. During this period, Dr. Blaunstein believes nanotechnology risks may already be covered by product liability, worker’s compensation, professional liability, and general liability insurance policies.

Apprehensive Phase. Serious concerns develop and “insurers and reinsurers begin to look at reducing” coverage. The industry seeks to contain risks through the use of “sub-limits” and “claims made” coverage.

Mature Phase. Insurers understand the risks and potential losses posed by nanotechnology and offer “customized solutions” . . . “at reasonable rates in both the insurance and reinsurance markets.”

Dr. Blaunstein closes by urging insurers to embrace an “enabling” role with nanotechnology and to work “with manufacturers, the government, scientists and regulatory agencies to identify and quantify nanotechnology’s risks.” Additionally, he believes, “[s]tandard, affordable coverage will eventually be available. In the meantime, by using claims-made forms and setting appropriate deductibles and limits that are commensurate with unknown risks, insurers can mitigate their potential losses and still participate in this exciting new market.”