Lloyd’s of London recently issued another nano-related insurance document: D. Baxter, "Nanotechnology: An insurer’s perspective," Emerging Risks, Lloyd’s of London.
First, Lloyd’s notes that several types of insurance may be impacted by potential EHS risks related to nanotechnology including: (i) professional indemnity, (ii) medical malpractice, (iii) director’s and officer’s liability, (iv) general liability, (v) employer’s liability, and (vi) product liability.
Lloyd’s then identifies several possible coverage options for insurers seeking to deal with these potential risks:
- Monitor and research emerging risks. Lloyd’s notes this approach cannot fully account for the danger of unforeseen, unanticipated risks.
- Price adequately and hold additional capital. Under this scenario, an insurer would not treat nanotechnology as a separate risk, increase premium prices to encompass any new risk and increase capital reserves accordingly.
- Exclude. Lloyd’s notes insurers could totally exclude coverage for nanotechnology businesses. In that case, Lloyd’s notes that exclusions must be well worded and enforceable to be effective. Lloyd’s also notes that the downside to this approach is that it "does not allow the insurer to acquire historical data to price for allowing cover in the future."
- Exclude and write back with limited cover. Under this scenario, an insurer would exclude nanotechnology from full coverage and then provide written separate limited coverage for those risks.
- Only accept claims within a fixed period. This approach would protect insurers against latent claims that appear years after a policy is written.
Finally, Lloyd’s recommends insurers ask their nano-insureds the following questions: (i) what nanotechnologies does the company use?: (ii) what are the known hazards of those materials?; (iii) what are potential hazards of those materials?; (iv) has the material’s toxicity been studied?; (v) has its environmental impact been studied?; (vi) does the company follow any voluntary nano-specific EHS guidelines? (vii) has the company performed a life-cycle assessment related to its use of nanomaterials?; and (viii) does the insured advise its customers about its use of nanotechnology?