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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
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   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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   Copyright Allianz SE                                                                    2
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.

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   Copyright Allianz SE                                                                  3
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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   Copyright Allianz SE                                                                                 4
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




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   Copyright Allianz SE                                                                                         5
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.




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   Copyright Allianz SE                                                                                        66
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




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   Copyright Allianz SE                                                                    7
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




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   Copyright Allianz SE                                                                            8
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   Copyright Allianz SE                                                                  9
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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   Copyright Allianz SE                                                                  10
"Dosis facit venenum."
                                             (Paracelsus, 1538)




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   Copyright Allianz SE                                                                  11
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
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   Copyright Allianz SE                                                                    12
Sizes of various objects for comparison




Source: VDI TZ / Federal Ministry of Education and Research
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    Copyright Allianz SE                                                                  13
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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   Copyright Allianz SE                                                                             14
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
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   Copyright Allianz SE                                                                  Nagoya
                                                                                                                             15
Natural sources of nanoparticles




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   Copyright Allianz SE                                                                  16
Consumer Nano-products




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

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   Copyright Allianz SE                                                                  17
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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      Copyright Allianz SE                                                                                  18
Nanoproducts in the future




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   Copyright Allianz SE                                                                  19
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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    Copyright Allianz SE                                                                  20
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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   Copyright Allianz SE                                                                          21
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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   Copyright Allianz SE                                                                          22
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


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   Copyright Allianz SE                                                                  23
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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   Copyright Allianz SE                                                                                24
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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        Copyright Allianz SE                                                                                              25
…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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     Copyright Allianz SE                                                                                                                              26
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




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   Copyright Allianz SE                                                                  27
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
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   Copyright Allianz SE                                                                  28
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




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   Copyright Allianz SE                                                                  29
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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   Copyright Allianz SE                                                                  30
…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
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   Copyright Allianz SE                                                                        31
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.




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   Copyright Allianz SE                                                                  32
…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

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   Copyright Allianz SE                                                                  33
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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   Copyright Allianz SE                                                                                                                     34
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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   Copyright Allianz SE                                                                  35
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




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   Copyright Allianz SE                                                                                     36
Nanotechnology risk landscape




                                                                                          Many voluntary data-gathering
                                                                                           systems but no

          Regulatory Risk                                                                     international nomenclature

                                                                                              practical guidelines



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   Copyright Allianz SE                                                                                       37
Nanotechnology risk landscape




                                                                                          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
© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
   Copyright Allianz SE                                                                         experts can be 38 basis for
                                                                                                                the
27
                                                                                                future claims
Nanotechnology risk landscape

                                                                                         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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   Copyright Allianz SE                                                                                        39
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

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   Copyright Allianz SE                                                                                    40
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
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   Copyright Allianz SE                                                                    41
Risk level for selected Nanomaterials

              (Nano)-silver                                 Carbon Nanotubes             Carbon Black




        Low Risk                   Medium Risk                   High Risk


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   Copyright Allianz SE                                                                     42
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
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   Copyright Allianz SE                                                                                               43
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
        Low Risk                   Medium Risk                   High Risk

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   Copyright Allianz SE                                                                                                44
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
        Low Risk                   Medium Risk                   High Risk

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   Copyright Allianz SE                                                                                               45
Technical risk assessment approaches




  Toxicological
  perspective
                                                               Exposure                  Hazard




  Insurance
  perspective
                                                             Frequency                   Severity


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   Copyright Allianz SE                                                                   46
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


© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                  47
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                  48
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                  49
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                    50
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                  51
Risk categories


                                                         unknown risks




                                                                                              insurable risks

                                                            elusive risks




                                                                                         insured risks
                                                        quantifiable risks


© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                                         53
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                   54
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
© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                   55
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                                 56
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                                57
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

© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                                       58
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




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                    59
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.




© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                  60
Thank you for
      your
      attention!




                                                                                              61
© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                  61
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.


© November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology
27
   Copyright Allianz SE                                                                                                             62

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Role of Insurance for Innovative Technologies: Nanotechnology

  • 1. 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
  • 2. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 2
  • 3. 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. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 3
  • 4. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 4
  • 5. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 5
  • 6. 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. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 66
  • 7. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 7
  • 8. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 8
  • 9. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 9
  • 10. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 10
  • 11. "Dosis facit venenum." (Paracelsus, 1538) © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 11
  • 12. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 12
  • 13. Sizes of various objects for comparison Source: VDI TZ / Federal Ministry of Education and Research © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 13
  • 14. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 14
  • 15. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE Nagoya 15
  • 16. Natural sources of nanoparticles © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 16
  • 17. Consumer Nano-products Source: http://www.nanotechproject.org/ © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 17
  • 18. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 18
  • 19. Nanoproducts in the future © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 19
  • 20. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 20
  • 21. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 21
  • 22. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 22
  • 23. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 23
  • 24. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 24
  • 25. 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) © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 25
  • 26. …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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 26
  • 27. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 27
  • 28. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 28
  • 29. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 29
  • 30. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 30
  • 31. …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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 31
  • 32. 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. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 32
  • 33. …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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 33
  • 34. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 34
  • 35. 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. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 35
  • 36. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 36
  • 37. Nanotechnology risk landscape  Many voluntary data-gathering systems but no Regulatory Risk  international nomenclature  practical guidelines © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 37
  • 38. Nanotechnology risk landscape  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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology Copyright Allianz SE experts can be 38 basis for the 27 future claims
  • 39. Nanotechnology risk landscape 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 39
  • 40. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 40
  • 41. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 41
  • 42. Risk level for selected Nanomaterials (Nano)-silver Carbon Nanotubes Carbon Black Low Risk Medium Risk High Risk © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 42
  • 43. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 43
  • 44. 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 Low Risk Medium Risk High Risk © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 44
  • 45. 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 Low Risk Medium Risk High Risk © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 45
  • 46. Technical risk assessment approaches Toxicological perspective Exposure Hazard Insurance perspective Frequency Severity © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 46
  • 47. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 47
  • 48. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 48
  • 49. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 49
  • 50. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 50
  • 51. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 51
  • 52. Risk categories unknown risks insurable risks elusive risks insured risks quantifiable risks © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27©Copyright Allianz SE 52
  • 53. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 53
  • 54. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 54
  • 55. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 55
  • 56. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 56
  • 57. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 57
  • 58. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 58
  • 59. 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 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 59
  • 60. 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. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 60
  • 61. Thank you for your attention! 61 © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 61
  • 62. 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. © November 2012, Milano, Role of Insurance for Innovative Technologies: Nanotechnology 27 Copyright Allianz SE 62