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The use of 3-D printing technology is changing the way things are made and making manufacturing risks more complex.
While conventional insurance policies cover 3-D printing risks, the process adds cyber and industrial espionage exposures to the manufacturing process, changes the nature of business interruption risks and clouds liability issues, experts say.
The process, where 3-D printers deposit material in successive layers to create a physical object from a digital file, dates back to the 1980s. The use of the devices, however, is expanding rapidly. Fort Collins, Colorado-based consultancy Wohlers Associates Inc. said in its 2017 report that the 3-D printing industry grew to nearly $6.1 billion in 2016 and is forecast to grow to more than $26 billion by 2022.
The process involves making a physical object from a three-dimensional digital model, usually by laying down many thin layers of a material in succession.
The printers use a variety of materials, such as epoxy resins, titanium, steel, wax and polycarbonate. They have been used by the aerospace, consumer electronics, defense and medical industries.
“3-D printing has been around for a while,” said Tom Srail, Cleveland-based technology, media and telecom industry leader at Willis Towers Watson P.L.C., “but the technology continues, as most technologies do, to innovate and leapfrog itself.” Mr. Srail said 3-D printing is widely used to build prototypes for various products.
“What used to take a long time to build and tool and design to even do prototypes — a new cellphone, a new microchip, a new part or device or widget — you can really fast-forward that time frame,” he said.
While manufacturers using 3-D printing are exposed to traditional risks, such as bodily injury and property damage, the use of the technology can change the nature of the risks, he said, noting that stealing from a company now is “as simple as hijacking a computer file.”
“You have everything you need to know to do an identical knockoff of that part,” he said. “There’s a lot to lose, and it’s much easier to lose it.”
Cindy Slubowski, head of manufacturing for Zurich North America in Schaumburg, Illinois, said that 3-D printing is moving quickly into a traditional manufacturing environment.
“It touches every industry,” she said.
“Construction companies are using it for everything from prototyping angles and how buildings are constructed to actually constructing buildings with 3-D printed materials. Health care industries using bio printing. It is advancing quickly as new materials come on board.”
Ms. Slubowski said manufacturers may overlook potential risks as they hurry to seize the new business opportunity.
“So if you think about a traditional manufacturer and a business interruption risk,” she said, “he could have supply chain issues, a catastrophic event, his machine goes down, whatever. Now when you introduce the technology that’s associated with 3-D printing, all of a sudden he opens himself up to a cyber attack that holds his machine and his process ransom.”
She added that “it’s the same business interruption concept, but it hits the manufacturer from a different perspective.”
William Mauro, director of commercial casualty, product development at ISO, a unit of Verisk Analytics Inc. in Jersey City, New Jersey, said “the assembly line concept that Henry Ford introduced for us may go away, and a single printer may be able to actually create component parts and put them all together.”
3-D printing, like many emerging risks, Mr. Mauro said, may be a new technology, but some of the perils associated with it — such as fire, counterfeiting, hacking and reputation risk — are not necessarily new to insurers.
“The insurance industry has ways of handling these types of perils where it’s not so much of a jump to say new technology now is going to impact me in a new way, here are the perils I’m expecting, and I know how to deal with those,” he said. “I can price fire damage, and I can do things like that on my normal book of business, now I need to get some consideration for 3-D printers.”
Bob Weireter, New York-based senior treaty underwriter and vice president with Swiss Re Ltd., said one of the most critical risk issues “is determining who is at fault when something goes wrong.”
This process, he said, requires evaluation of the software designer, the 3-D printer manufacturer, whoever made the materials that the 3-D printed product is made from, who operates the printer that produces the product and who puts it into the stream of commerce.
“This chain of custody is much clearer for products made in a traditional manufacturing setting,” Mr. Weireter said, “but can be quite confusing for 3-D printed products. It is not clear where the ‘manufacturing’ occurs in 3-D printing, so allocation of liability is expected to be challenging.”
Long-term durability of the 3-D printed product is another issue, he said, and while there is a good sense of this for products made by traditional methods, more time is needed to assess the durability of 3-D printed products in real use.
“There is a lot of research being done on this, but more time is needed to draw firm conclusions,” Mr. Weireter said.
It is still a buyer’s market for excess and surplus lines, with significant capacity and continuing rate declines — although there have been rate hikes in select lines — say experts, who generally predict the overall soft market will continue for the foreseeable future.