A new emerging risks report from the specialist Lloyd’s of London insurance and reinsurance marketplace and Drs John Heap and Karen Polizzi of Imperial College London, urges re/insurers to engage with the expanding synthetic biology sector to support the development of new technologies and new risk transfer solutions.
In recent times, scientists have looked to develop altered or entirely new organisms using biotechnology, for applications such as disease prevention and treatment, fuel, chemical production, crop resistance, and also space exploration.
However, as biotechnology and synthetic biology research continues, associated risks such as bioerror (the accidental release of biological organisms), bioterror (the construction of biological weapons), and the unintended consequences of biological research, could be on the rise.
To give a sense of market growth in recent times, the report states that in 2010 the market was estimated at $1.1 billion, which increased to $5.2 billion in 2015, and which is forecast to hit $38.7 billion by 2020.
“As the technology continues to develop, it is important for insurers to consider the extent to which they wish to be, or may already be, exposed to potential systemic risks associated with synthetic biology,” says the report.
The report urges insurers and reinsurers to engage with the synthetic biology sector. Through collaboration, the report calls on re/insurers and manufacturers in the space to support the responsible development of new synthetic biology technologies.
At the same time, it could prove to be an additional and diversifying revenue stream for re/insurers, so it’s important that the industry innovates to develop existing and new risk transfer solutions to underwrite the synthetic biology segment, explains the report.
The nature of the growing sector means that the risk profile is changing as it develops, with commercialisation and digitalisation of research supporting speedy development, while new developments are constantly on the horizon.
“Insurers should ensure they include appropriate limits and keep a close watch on developments as bio- innovation is adopted in more and more sectors,” says the report.
The report also states that synthetic biology now enables more modifications to organisms and also on a larger scale than before, which means there is a much higher chance that the boundaries of what is achievable will constantly be shifted. As a result, Lloyd’s and the Imperial College London urge insurers to utilise scenario and counterfactual analyses to understand the impacts of potential disruptive events when assessing risks.
“Insurers and brokers must discuss the potential risks openly with companies. Health and safety, product liability and third-party liability risks will all need to be assessed,” says the report. Adding that both transparency and collaboration will be key moving forward.
“As the technology continues to gather pace and interest it has never been more important for insurers to consider the extent to which they wish to be exposed to such systemic risks, and scenario thinking and current biomedical and life sciences insurance tools may serve as a starting point.
“Action can be taken to support the responsible development of these new technologies, and there is potential for existing and new risk transfer solutions to be developed to underwrite this progress,” concludes the report.