AGCS Role of Insurance for Nanotechnology

Allianz Global Corporate & Specialty

Role of Insurance for
Innovative Technologies:
Nanotechnology

AGCS Risk Consulting /
Head of R&D, Michael Bruch /
Milano
27 November 2012

© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
Copyright Allianz SE 1

Table of
contents 1 Allianz and AGC&S
2 Emerging risk definition
3 What is nanotechnology and where is it used?
4 Opportunities and risks from an insurers
perspective

5 Risk assessment of nanorelated applications
6 What is needed to promote nanotechnologies in
as sustainable manner?
7 Outlook

2
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Allianz
An Introduction
Allianz Group is one of the world’s leading insurers and financial
services providers

 Founded in 1890 in Berlin, Allianz companies now extend to over 70
countries with approximately 142,000 employees and 78 million customers
 Insurer financial strength rating of AA (‘Very Strong’) from S&P and A+
(‘Superior’) from A.M. Best
 International network of strong brands,
with first-class products in the fields of:
1. property and casualty insurance
2. life and health insurance
3. asset management

For more information visit www.allianz.com.

27

Allianz SE Results 2011

In summary Revenues again surpass
 Solid performance despite difficult environment
1 €100bn mark

 Stable operating profit of €7.9bn, on target €1.8bn in NatCat claims paid
 Revenues of €103.6bn, close to 2010’s record
2 or reserved for our customers
(€106.5bn)
Operating profit target
 Net income of €2.8bn (2010: €5.2bn) impacted 3 achieved despite challenges
by impairments from Greek sovereign bonds
and financial sector investments Diversified business key to
 P&C business: revenues increased to record 4 strength
high of €44.8bn - profitability also maintained
Excellent capital position with
 L&H business remains on high level with €2.4bn
operating profit
5 strong solvency ratio

 Asset Management delivers excellent result
 Strong capital position further improved: “These results show the true
shareholders’ equity rose to €44.9bn, solvency strength of the Allianz business
ratio increased to 179% as at Dec 31 st 2011 model.“
 Allianz SE maintains its strong financial ratings
Michael Diekmann, CEO of Allianz SE

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Allianz Global Corporate & Specialty
An Overview

We are one of the few specialist corporate insurers with a genuine global market
presence who can provide “one carrier” insurance solutions across the whole
spectrum of corporate and specialty risks.
Product lines
 Diversified product portfolio
Alternative Risk Transfer Aviation
 Wide range of complementary services,
including specialist non-traditional risk transfer
solutions provided by our subsidiary ART Energy Engineering / Construction

 Financial strength: €4.9 billion GWP (2011)
Financial Lines Global Programs
 Global reach: integrated in the Allianz network
of more than 150 countries worldwide
 Extensive international experience: manages Liability / Casualty Marine

some 1,600 International Insurance Programs
 More than 3,400 dedicated employees Property Risk Consulting

27

Emerging risk definitions according to
CRO ERI members

 Full nature and effects are not yet known
 May develop or already exist
 Difficult to quantify and may have a large
loss potential on society and industry
 Represent potential business opportunities
for the insurance industry as well
 Often they are already present in an insurers
existing portfolio.

27

Table of
perspective

7 Outlook

27

Examples of Emerging Risks….and their drivers
Innovation

 Electromagnetic fields
Economy
 Genetic modified organism
 Power blackouts
 Cyber risks
 Endocrine disrupters
 Nanotechnology
 Obesity
 Offshore Wind
 Longevity
 …
Legal framework
Society

27

27

Risk Assessment - Opportunities and Risks of Nanotechnologies

Joint Report with the International Future Program of
OECD in 2005

Contents:
 What is nanotechnology?
 Markets for nanotechnologies
 Players
 Government programs
 Risks
 Opportunities and Risks for the AZ Group

Press conferences in London, München,
Wien, Madrid

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"Dosis facit venenum."
(Paracelsus, 1538)

27

Table of
perspective

7 Outlook

27

Sizes of various objects for comparison

Source: VDI TZ / Federal Ministry of Education and Research
27

New properties of engineered nanoparticles

Quantum-mechanic Increased surface area Molecular recognition
behaviour

„New“ technical physics „New“ chemical processes „New“ bio-applications
through changes in through changes in through combination with
 Colour, transparency  Melting and boiling  Self-organisation
 Hardness point  Repairability
 Magnetism  Chemical reactivity  Adaptability
 Electrical conductivity  Catalytic yield  Recognition

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What is Nanotechnology?

Nanotechnology is the understanding and control of matter at
dimensions of roughly 1 to 100 nanometers

Synthesis and Manipulation of matter in
Nano Scale Dimensions
 Nanoparticles (e.g. Carbon Black)
 Carbon nanotubes / fullerenes
Fullerene
 Atomic Force Microscope
 ...

Materials with tailor-made new physical, chemical and
biological properties.

Sources: Universities of Reading,
Carbon Nanotube
27
Copyright Allianz SE Nagoya
15

Natural sources of nanoparticles

27

Consumer Nano-products

Source:
http://www.nanotechproject.org/

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Nanoproduct figures 2011

Number of products according to main categories ( ∑ = 1,393)
Cross cutting applications (coatings) Appliances
Goods for Children 6% 3% (washing machine, air cleaners)
Electronics and Computers 2% 8%
4% Food & Beverage
(e.g. dietary supplement)

Home & Garden 15%

(cleaning supplies)
Automotive
(tires, lacquers) 9%
Health & Fitness
53% (sporting goods, clothing,
cosmetics, sunscreens)

Source: www.nanotechproject.org

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Nanoproducts in the future

27

Ongoing industrial production of nanoparticles

Pyrogenic oxides
• Silica (1940´s)
• Surface-treated silica (1960´s)
• Alumina (1950´s)
• Titania (1950´s)
• Mixed metal oxides (1950‘s)
• Zirconia (1990´s)
• Zinc dioxide (2000´s)

Source: Dechema / VCI
Nanostructured materials are not new
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Zinc oxide for UV-A protection
How does it work?
 Nanoscale ZnO absorbs and scatters UV-
light

Skin
 High sun-protection factor
 Good feeling
 Protects against cancer and skin aging

Wood and polymers
 Long term UV-protection
 Transparency
 No leaching
 Stable at elevated temperature
SourceDechema / VCI
 Increased outdoor lifetime of wood
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Self-cleaning surfaces: Lotus effect

Lotus leaf Microstructures of a lotus leaf with Technical realisation of
water-repelling nanostructured the lotus effect
wax crystals Beispiel: Facade paint

Surface with lotus effect
water

dirt particles

Source: FCI

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Cancer therapy with nanobiotechnologically
modified iron oxide nanoparticles

Application principle:
 Nano-particles are absorbed specifically by the
cancer cells
 Special iron oxide nano-particles are super-
heated in cancer cells by an external magnetic
field thereby killing the cancer cells

Status quo
 since 2005 clinical trials for glioblastoms
(malignant brain tumors)
 in 2011 this treatment has received an EU
approval for therapy use

Source: MagForce

27

Carbon Nanotubes

 Strongly investigated since the beginning of the 90’s
 Extraordinarily active field of research

Properties:
Applications:  6 times lighter than steel—but
 Composite materials (metal, ceramic, 100 times stronger
polymer matrix)  Compressive strength: 2 x
 Field emission displays Kevlar
 Tensile strength: 10 x steel
 CNT-electronics
 high electrical conductivity
 Bio sensors

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Nanotechnology in cars today…

Color dependent on
Anti-reflection coating viewing angle
(dashboard instruments)

Scratch-resistant paint
Heat-reflecting and self-
cleaning glazing

Reduced wear and tear
in the engine

Scratch resistant
coating (plastic parts)

Light-emitting diodes Dirt-repellent surfaces
(LEDs) in the headlights
Elektrochrome rear-view mirrors
Carbon Black in tires for less (darken upon receiving an
abrasion and better adhesion
electrical signal)

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…and tomorrow

Scratches in the paintwork “heal`” by themselves with
selforganizing nanoparticles

Catalysts and nano membranes for
Distributed solar cells using better fuel cells
conformable photovoltaics
High-brightness nano-enhanced polymer displays

Carbon nanotube alloys for lighter,
tougher frames

Ceramics with improved catalysts
for reduced emissions Sensors monitoring e.g. road
conditions, vehicle’s steering
ability

Lighter, tougher tires; nanoclays to
improve tire gas barriers
Polymer composite panels for
greater stiffness and toughness
Fast-charge batteries for
hybrid cars

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Direct benefits for insurers from nanoproducts

 Damage-resistant building materials – but
loss patterns with new materials are
unknown
 Stronger or more adaptive materials to
absorb crashes (e.g. automotive sector)
 Wireless, nano-enabled sensors to report
defects in structural components
 Pollution cleanup and prevention
 Nanoenabled medical therapies

27

Table of
perspective

7 Outlook

27

The business opportunities from an insurer’s perspective

 Growth sector for commercial and industrial insurance cover

 Adequate insurance cover as an prerequisite for entrepreneurial activity
especially for small- and medium-sized enterprises

27

However...
Free nanoparticles
- can travel deep into the lung and reach the alveoli
- can induce inflammation and tissue damage
- can pass the blood brain barrier
- can reach the blood stream and are transported to
various organs © David B Warheit, DuPont Haskell
Laboratory

- can enter the body over various pathways

 A few manufactured nanomaterials have shown toxic properties

 There is a correlation of the concentration of fine and ultrafine particles in
ambient air with mortality rates found in epidemiological studies

 We cannot exclude unintended long term effects on health and environment

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…and the exposure of persons and the release of
nanoparticles into the environment will increase

 Contamination of the environment, buildings etc. from sudden and
accidental releases

 Increasing number of work places affected

 Increasing deliberate applications in products
(Medicine, Pharma, Cosmetics etc.)

 Unintended release of nanoparticles from products
during their life cycle
(use, destruction, incineration, disposal ...)

Water droplet / „Lotus“-effect
27

Why is Nanotechnology an Emerging Risk
for insurers (1)

 Existing insurance covers include risks of nanotechnology.

 The knowledge is incomplete in terms of emission sources and quantities,
toxicology, ecotoxicology and environmental behaviour.
 Reliable standardised methods of measurement and guidelines for testing
are mostly missing.
 Involvement of high number of companies from different industries incl.
subsequent processing companies.
 Multiple lines of business and multiple classes of insured could see claims
Potential loss scenario resemble major product liability cases from the past.

27

…why is Nanotechnology an Emerging Risk
for insurers (2)
 Regulatory uncertainties
 Unclear definition and terminology
 Ambiguity in risk perception - significant NGO activity and low consumer
knowledge
 No loss history available
 Imbalance and lack of information
 Identification, monitoring and controlling of those few particles and
applications which may pose a health or environmental risk is difficult.

=> Even under an optimistic scenario it will take several years until the
“knowledge gaps” will be closed

27

Emerging Risk Update - Nanotechnology

Occupational health risks1)2)
 More than 1,000 nanotechnology firms in US have fewer High Nano
than 25 people. related
 Survey on occupational safety and health, University of
occupational
California: health risks for
SMEs and
- Only 46% of Nano firms have nano-specific
environmental health and safety programs (EHS).
secondary
producers…
- Nearly 30% of the companies that did require personal
protection only required dust masks.
- Confusion about the right best practice measures in
terms of nano workplace safety.
 The larger the firm, the more likely it will have nano-
specific EHS in place.

1) http://www.newhavenindependent.org/index.php/archives/entry/survey_shows_confusion_on_protecting_nano_workers
2) http://www.genre.com/sharedfile/pdf/InsuranceIssues201111-en.pdf

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Emerging risk update - Nanotechnology

 EU- operational health and safety experts (OSHA)
see nanoparticles as major concern on workers Increasing risk
health. perception of
http://osha.europa.eu/en/publications/reports/TE3008390ENC_chemical_risks/view
Nanotech risks
 No pending claims known but legal advisers on the part of
recommend to place nanoproducts into commerce regulatory
before insurers are able to realise and quantify bodies, lawyers
nanorisks. and research
 Due to toxicity concerns industry will face tougher institutes.
product testing rules for nanoparticles in cosmetics
as of 2013 (e.g. sunscreens).
 EU reforms will force food manufacturers (EU’s
novel food regulation) to state and to label if
products contain nanoparticles.

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Potential for major exposure

Factor for consideration Manufacture Use End of life

Ability to control exposure High Medium Low

Time for impact Short or long Long Long
Potential for exposure to nanomaterials
Who/what at risk for exposure Workers Consumers Environment

Key form of exposure Free particles Fixed particles Fixed particles

Degree of regulation High Medium Low
Incentive for produce to invest in
High High Medium
countermeasures
Tens to Thousands to
Number of individuals at risk Millions
thousands millions
Possible over
Opportunity for exposure to large volumes Frequent Rare
time
Unresolved questions Fewest More Most

27

Nanotechnology risk landscape

 Many voluntary data-gathering
systems but no

Regulatory Risk  international nomenclature

 practical guidelines

27


 Most of the products seems to be
safe

 Number of risk studies is
Production Risk increasing but

 no clear answers on safety
profile of nanoparticles and
Regulatory Risk nanoproducts

 The more risk studies we see
the higher the (un)certainty
gets(?) – disputes among
Copyright Allianz SE experts can be 38 basis for
the
27
future claims


Highest impact on the overall risk,
due to the lack of

 qualified hazard and exposure
data
Perceptual Risk
 strong legal framework

 harmonised public risk
communication (risk-benefit
approach)

Production Risk

Regulatory Risk

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Nanotechnology headlines

Nanotechnology risks: The new asbestos?
The safety risks of nanotechnology use by the food industry What is the
could make it “the we asbestos”….
influence of the
perceptual risk
Nanofibres could be as harmful as on nano-
asbestos
Experts have said that inhaling nanofibres technology?
could be equally as damaging as breathing
asbestos.

Nanomaterials, sunscreens and cosmetics:
Small ingredients, big risks
Friends of the Earth's report “Nanomaterials, sunscreens and
cosmetics: Small ingredients, big risks" details the extensive use of
nanomaterials in 116 products, from sunscreens and anti-aging
The dangers of nanotechnology, a
creams to shampoos and toothpastes, despite preliminary scientific warning to consumers
evidence that many types of nanoparticles can be toxic. Although there is potential benefit to
consumers, nanomaterials can also pose new
threats to human health and the environment -
Nanotech-based products offer warns consumer group.
great potential but unknown risks
Some experts push cautious approach as
market keeps expanding

27

Table of
perspective

7 Outlook

27

Risk level for selected Nanomaterials

(Nano)-silver Carbon Nanotubes Carbon Black

Low Risk Medium Risk High Risk

27

Case study: (Nano)-Silver applications
Products today:
• Textiles
• Food-packaging
• Self-sterilizing medical or
consumer devices  More and more products are entering the
• Washing machines market

 Lack of risk data and categorization as
pesticides raise concerns

 NGO calls for Samsung “Nano Silver” washing
machine recall
Perceptual Risk
 Long-term experience with silver-ion devices

 Seems to be a low risk for workers and
consumers

 Many open questions concerning disposal of
products (environmental risk)
Production Risk
 EPA (US) has regulated silver-ion-generating
applications as pesticides

 but only marketing of these products is
Regulatory Risk affected
Low Risk Medium Risk High Risk  Regulation based on environmental risks to be
expected
27

Case study: Carbon Nanotubes

Products today:
• Composites
• Electronic devices

 Frequently compared with asbestos

 Few “close-to-the-consumer” applications
(e.g. food, cosmetics, pharmaceuticals)

Perceptual Risk
 Variety of production processes creates CNTs
with different properties incl. unclear toxicity
effects

 Low exposure level (today)

 Many safe applications (electronic devices) but
also applications with unclear effects over
Production Risk product-life-cycle

 Regualtory framework for CNTs will probably
change due to material specifics
Regulatory Risk

27

P

Case study: Carbon Black

 Used since decades without risk concerns
coming up

 Remaining risk:

 Ultra fine dust (e.g. wheel abraison)
•Car tires
•Toner pigments  Cause of health complaints concerning
emissions of office machines still
Perceptual Risk unclear

 High market relevancy and long time
experience in manufacturing

 No evidence for specific bodily or
environmental harm at manufacturing or
disposal
Production Risk

 No need for regulatory changes due to
extensive data
Regulatory Risk

27

Technical risk assessment approaches

Toxicological
perspective
Exposure Hazard

Insurance
perspective
Frequency Severity

27

Insurance scenarios

 Pollution spill from a nanoparticle production facility
 Nanoparticle manufacture workers develop chronic illness
 Nanoparticles leach from products to accumulate in the environment
 Product recall due to research findings indicating product is a hazard
 Liability claims on a company, directors and officers regarding a product that was
indicated by research to be unsafe, but subsequently released to the consumer
market.

Source: Lloyds

27

Magic Nano - First Product liability claim with Nano?

Product
 Aerosol sealing spray for making glass and ceramic surfaces
water- and dirt-repellant

Loss history
 100 customers reported respiratory complaints
 Media: “First health-related product recall of an alleged
nanotechnology consumer product”
 Insured product liability event (loss amount < 1 Mio EUR,
secondary claims via social insurance agencies)

Damage & loss analysis results
 No nano-sized ingredients (silicon dioxide)
 Potential cause of loss: Inhalation of very fine airborne droplets
 Lack of evidence base

27

Magic Nano - Lessons learned

Reputational risk
 First impressions matter
 Incident was a wake-up call for the whole nano community
 Negative blast for a hitherto positive image of business

Recommendations
 Development of standards for terminology and labeling
 More transparency on use of nanomaterials and safety issues
 Appropriate research activities into human health and
environmental impacts
 Risk Management:
- Reputational damage exposure
- Crisis communication

27

Table of
perspective

6 What is needed to promote
nanotechnologies in as sustainable manner?
7 Outlook

27

Risk Management process

Risk Insurance
identification
solutions
Risk avoidance provides the
financial
s sy ana ks R

Risk
i

assessment
Risk reduction, loss security to ease
prevention
(e.g. workplace safety the bump in the
i l

measures) balance sheet.

Risk handling Risk transfer (e.g. insurance)

Risk provisions
(e.g. setting up reserves)
Risk control

27

Risk categories

unknown risks

insurable risks

elusive risks

insured risks
quantifiable risks

27©Copyright Allianz SE 52

Insurability of nanotechnologies

Criterion • Status quo
•
Assessability: • limited evidence base
Probability and severity of losses quantifiable • latency effects / long term exposure
•
Randomness:
Time of insured event unpredictable and • √
occurence independent of will of insured
• wide variety of applications
Mutuality • wide variety of chemical substances, sizes, surfaces
Risk community, large number of risks, • various industry segments
diversification • various sizes of clients
• sub classes of widely used materials
•
Economic feasibility
• strongly dependent on scenario
Premium commensurate with the risk
Causation
• Agent in principle analytically provable
Causal relationship between the action or
• Signature diseases?
omission of the insured and the resulting
• Knowledge gaps can lead to legal risks
damage / injury / financial loss

27

An insurer provides financial security for remaining
risks via insurance cover if:

 Predictable issues are positively and
transparently handled Identify Assess
risks risks
 Problematic processes/products do not enter
RM
market Cycle

Monitor & Implement
 Unique or novel risks are identified early and Control measures

managed properly
 Existing hazards are actively managed

27

What is needed to promote innovative technologies?

Nanotechnology: Requirement profile of different stakeholders

Manufacturer • Access to loans / equity capital • Insurances are a
• Reliable results from safety/toxicology studies precondition for access
• Information concerning safe handling of to capital markets
nanomaterial incl. measuring methods
• Risk costs can be
• Support in compiling Material Safety Data distributed onto many
Sheets (MSDS) shoulders which allows
• Binding character of toxicological results and (excessive?) risks to be
impact on regulatory framework taken

• Open communication and information on both
Consumer • Transparency via
risks and benefits stakeholder dialogues, risk
• Generally understandable risk and ingredients assessments and adequate
information via media (e.g. internet, TV) incl. risk premiums
labeling • Best available
• Convenient for consumers and independent technology for loss
test results prevention measures
• Code of practice?
Regulator • Uniform terminology
• Acknowledged measuring methods and • What is an accepted
standards risk level?
• Valid toxicological research results
27

What is needed for a sustainable development of
Nanotechnology?
Risk Management/Risk Assessment
 Risk assessments across the whole product lifecycle
 Reliable results from safety/toxicology studies
 Information concerning safe handling of nanomaterial incl. measuring methods
 Support in compiling Material Safety Data Sheets (MSDS)
 Binding character of toxicological results and impact on regulatory framework

PROs: Limitations Supportive measures

+ Gives clear guidance how to - How much tests/evidence base  Development of best practice
assess the risk of are required? guidelines for safe production
nanomaterials and nano-
enabled products
- Must include the whole product and handling
lifecycle  Stakeholder dialogues?
- Variety of particles, production  Funding of risk research
methodologies, applications
- Limitations concerning
adequate and standardised
measuring methods and
instruments

27

What is needed for a sustainable development of
Nanotechnology?
Risk communication and perception
 Open communication and information on both risks and benefits
 Generally understandable risk and ingredients information via media (e.g. internet, TV) incl.
labeling
 Convenient for consumers and independent test results

PROs: Limitations Supportive measures

+ Understandable risk/benefit - What is a general accepted risk  Stakeholder dialogues?
analyses increase the level and how to define it?
acceptance level of
nanotechnology
- Risk/benefit methodology has
to bridge the gap between
being accurate enough and
easy-to-understand

27

What is generally required to drive innovative technologies
sustainable?

Risk-/benefit How much
Stakeholder analyses for a evidence of risks
dialogues general accepted does a society
risk level need?

Moratorium
versus How much
corporate regulation is
self- needed?
responsibility

Risk assessment: Is How should a …and what
there evidence that a future best- can be the
proactive practice Risk contribution
Environmental, Social, Management of insurers?
Governance (ESG) look like?
Management signals a
better overall Risk
Management of a
company

27

Table of
perspective

7 Outlook

27

The Outlook

 Sustainable exploitation of nanotechnologies will lead to economic and
technical progress that are of major importance to the global economy.

 Dedicated research on risks, high-quality risk management and continuous
dialogue will lay foundation for positive public take-up of nanotech.

 Positive stewardship, complemented by responsible insurance will support
the sustainable future of nanotech developments.

27

Thank you for
your
attention!

61
27

Disclaimer

These assessments are, as always, subject to the disclaimer provided below.

Cautionary Note Regarding Forward-Looking Statements
The statements contained herein may include statements of future levels, (vi) the extent of credit defaults, (vii) interest rate levels, (viii) currency
expectations and other forward-looking statements that are based exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changing
on management’s current views and assumptions and involve known levels of competition, (x) changes in laws and regulations, including
and unknown risks and uncertainties that could cause actual results, monetary convergence and the European Monetary Union, (xi) changes in
performance or events to differ materially from those expressed or the policies of central banks and/or foreign governments, (xii) the impact of
implied in such statements. In addition to statements which are forward- acquisitions, including related integration issues, (xiii) reorganization
looking by reason of context, the words “may”, “will”, “should”, “expects”, measures, and (xiv) general competitive factors, in each case on a local,
“plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, regional, national and/or global basis. Many of these factors may be more
“potential”, or “continue” and similar expressions identify forward-looking likely to occur, or more pronounced, as a result of terrorist activities and their
statements. Actual results, performance or events may differ materially consequences.
from those in such statements due to, without limitation, (i) general economic
conditions, including in particular economic conditions in the Allianz Group’s
core business and core markets, (ii) performance of financial markets,
including emerging markets, and including market volatility, liquidity and
credit events (iii) the frequency and severity of insured loss events,
including from natural catastrophes and including the development of loss No duty to update.
expenses, (iv) mortality and morbidity levels and trends, (v) persistency The company assumes no obligation to update any
information contained herein.

27

AGCS Role of Insurance for Nanotechnology

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