2016 Most Dangerous Emerging Risks

Gene Editing: The Devil’s in the DNA

Biotechnology breakthroughs can provide great benefits to society, but the risks can’t be ignored.
By: | April 4, 2016 • 8 min read

SCENARIO: The Verde avocado was one of several fruits introduced by biotech pioneer AgriBoundless. The Verde was a biotech success story — a genetically edited variety with flesh that was very slow to brown after cutting.

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Restaurants and other establishments across the food service spectrum gave Verde the thumbs-up for helping to cut down waste caused by the short shelf-life of avocados — a popular but costly ingredient. National Tex-Mex chain Meximillion was the largest purchaser of Verde, ordering them chain-wide after a brief trial in numerous California locations.

Nearly a year after its introduction, however, a paper published by UC San Diego School of Medicine’s immunology division traced a series of mysterious allergy cases back to the Verde avocado.

Only a small percentage of people developed an allergy to the Verde avocado, but it was enough for a sizable class action.

The paper sparked a flurry of interest from immunologists across the country grappling with similar cases.

Agriculture officials ordered a recall of Verde, pending an investigation. Meximillion and other establishments struggled to secure alternate suppliers. Restaurants in some regions had to take guacamole and other popular items off of their menus.

The investigation wasn’t yet complete when the lawyers came knocking. Only a small percentage of people developed an allergy to the Verde avocado, but it was enough for a sizable class action.

A few of the affected consumers, including one child, nearly went into anaphylactic shock. AgriBoundless and its distributors were named in the suit, as well as Meximillion and four other restaurant chains.

Long before the case ever got to trial, Meximillion was tried and found guilty in the court of public opinion for putting genetically edited food on its menu. Its actions conflicted with its brand, which was wrapped around its fresh and natural ingredients and its “No to GMO” stance.

A crisis management team immediately launched an educational campaign to help people understand that the Verde avocado was non-GMO, but the public presumed that even if it wasn’t GMO, it had to be just as bad.

Competitors were eager to let their customers know that they only used “real” avocados.

The next meeting of Meximillion’s shareholders was a grim one indeed.

ANALYSIS: In a 1923 essay, scientist J. B. S. Haldane imagined the invention of a purple alga called Porphyrococcus, which so accelerated wheat yields that it led to a food glut, virtually collapsing the economy of agricultural states.

In Haldane’s scenario, an errant strain of the algae escaped into the ocean and multiplied, creating so many nutrients that it resulted in an explosion of the fish population.

Oh, by the way, it also turned the ocean purple, permanently.

Haldane was ahead of his time, yet no prophet … the Atlantic remains blue. But just shy of a century later, the science that Haldane imagined is our reality.

New organisms like Haldane’s purple algae are being created from scratch by mankind rather than Mother Nature. And mankind is taking nature’s existing creations and altering their genetic structure to better suit our needs. Thanks to recent advances, these feats can be accomplished with stunning speed and at less cost than ever before.

The discovery of a system known as Crispr-Cas9 is a massive lunge forward in biotechnology. Crispr-Cas9 is a like a DNA scissor — a genetic equivalent of the find and replace function of a word processor. It gives scientists the ability to delete or swap out pieces of a genome in order to change or eliminate traits.

A snip here, a snip there and voila — two bulls born recently in Iowa will never grow horns. Neither will their offspring. What used to take many generations to accomplish via selective breeding can be achieved in just one, with more precision.

Crispr-Cas9 is also a game-changer because it makes genome editing accessible to an unprecedented degree. An edited genome can now be produced in a matter of days. And the process is so straightforward that a grad student can master it in about hour, say scientists.

UC Berkeley biochemist Jennifer Doudna explains what Crispr-Cas9 is and what researchers hope to accomplish with it.

The possibility for advances in medicine and pharmaceuticals is breathtaking. Scientists are hard at work on projects such as engineering cancer patients’ immune cells to more effectively attack tumors.

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A company called Intrexon may be on the verge of editing out the ability to transmit the Zika virus in the wild mosquito population.

Man-made yeasts and algae are being tested to produce everything from new biofuels to cosmetic oils to “natural” vanilla flavoring.

Synthetic yeasts in development are being tested for their ability to change the flavor of yogurt, bread, beer and pickles. Gene editing is being tested for its ability to edit fruits and vegetables to increase their edible flesh, resist browning and retard ripening.

“We, as responsible members of the risk management community, want to encourage a balance. We want to encourage innovation.”— Walker Taylor, managing director, life sciences practice, Arthur J. Gallagher & Co.

Gene-editing research on animals is yielding stunning results. Scientists produced pigs that are easier to fatten up, cattle that produce more tender meat (and more of it), cashmere goats that grow longer hair, and chickens that produce only female offspring for egg-laying, among many other apparently successful improvements upon what nature created.

Keep in mind that the first synthetic genome was created in 2010, and Crispr-Cas9’s true potential came to the fore just two years later — these breakthroughs haven’t even scratched the surface of what may come.

Evolving Regulation

Debates and hand-wringing are in full swing over human genome editing as well as the potential bioweapon applications of gene editing and synthetic biology (synbio). But threats related to commercial applications are no less controversial, from the possible effects on human health to concerns about the environment and biodiversity.

“We would expect such products to be thoroughly tested at every stage of their development,” said an insurance executive, “but there are no guarantees — you can never completely eliminate the risk that they might interact with the wider environment in unexpected ways.”

A complex regulatory environment is expected to keep the risk level in check for medical and pharmaceutical industries. But the regulation of agricultural and food products is a very different process.

“Remember Olestra? They put it out in the food chain and then went, ‘Whoa! This is not good for our bodies.’ ”— Sandie S. Mullen, senior vice president, national life science practice leader, RT Specialty

Established regulatory environments do address biotechnology products. From a risk management standpoint, experts noted it should be reassuring to insurers and others that these technologies “are not operating in a regulatory vacuum.”

There are subtleties still to be sorted out, however. While an edited genome is modified, it is not currently considered GMO. That distinction is reserved for organisms with foreign DNA added to their own. Edited genes contain no foreign DNA. The result is the same species, just altered somewhat.

Current regulatory structures don’t address this kind of modification, so edited genomes are not subject to the more stringent approval process that governs GMOs. The U.S. Department of Agriculture is studying Crispr-Cas9 and plans to make recommendations in the near future.

Sandie S. Mullen, senior vice president, national life science practice leader, RT Specialty

Sandie S. Mullen, senior vice president, national life science practice leader, RT Specialty

In the meantime, seemingly benign products of biotechnology will quietly work their way through the agricultural and manufacturing sectors, into our homes and businesses as well as onto our plates. If there are problems, they will eventually make themselves known.

“Remember Olestra?” asked Sandie S. Mullen, senior vice president, national life science practice leader with RT Specialty. “They put it out in the food chain and then went, ‘Whoa! This is not good for our bodies.’ ”

As long as a product is deemed generally safe for the public, it’s going to be sold.

“If you come up with a new vanilla or a new oil, you can put it out in the marketplace. And if it doesn’t immediately cause [harm], it could be out in the marketplace for years,” said Mullen, also citing asbestos as an obvious example of how significant hazards can lurk in the shadows.

Current regulations, however, could soon change the way companies weigh the use of biotech products in their own operations.

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In July of 2015, the White House directed the EPA, FDA and USDA to overhaul the federal Coordinated Framework for Regulation of Biotechnology, which has not been updated since 1992.  As part of that directive, the agencies were to develop a strategy “to ensure that the federal regulatory system is well-equipped to assess efficiently any risks associated with the future products of biotechnology.” The first public meeting on the update was held this past October.

For now, products created through synthetic biology or gene editing technology are considered distinct from GMOs and don’t need to be labeled as such, allowing manufacturers to avoid association with the GMO stigma that has been created by the media and certain public interest groups.

But the lack of transparency could eventually backfire, as in our avocado scenario. If the information is made public unexpectedly, the potential for reputational risk can be quite severe.

Insurers’ Key Role

Though in its infancy, this science has the attention of numerous industries. This presents some thorny challenges for risk managers and insurers. Risk managers will need to weigh the specific benefits of biotech products against their potential risks — no easy feat when the risks are largely unknown.

In gene editing, the problem of “off-target mutations” is well established. Scientists are already making strides in reducing these mutations, but there’s no ironclad guarantee that some latent mutation won’t produce an unforeseen effect down the road.

Walker Taylor, area president, managing director of the life sciences practice, Arthur J. Gallagher & Co.

Walker Taylor, area president, managing director of the life sciences practice, Arthur J. Gallagher & Co.

Switching to a biotech ingredient could yield significant cost savings, but companies must be open to discussing the possible latent issues that might arise with brokers and carriers.

“We’re talking about risks that are low frequency, high severity — I think this industry presents a lot of that,” said Walker Taylor, area president and managing director of the life sciences practice at Arthur J. Gallagher & Co.

“It makes good sense for the insurance industry to be involved in these issues,” he said.

While these newer products of biotechnology may be distinct from GMOs, experts say that insurers are likely to take a similar approach, applying their experience with genetic engineering to gene editing and synbio.

“We have never excluded GMOs completely from our policies,” said Dr. Markus Kalin, head of global casualty risk engineering at XL Catlin, “and I think we would apply a similar approach to synthetic biology.”

Kalin pointed out that GMOs once posed a similar degree of unknown risk and fears of hidden dangers. Overwhelmingly though, “those fears have not been realized in this field.”

Taylor noted that the system of checks and balances in insurance allow it to undertake such risks in a controlled fashion, and the important part it will play as science advances.

“We, as responsible members of the risk management community, want to encourage a balance. We want to encourage innovation,” Gallagher’s Taylor said. &

BlackBar

2016’s Most Dangerous Emerging Risks

brokenbridgeThe Fractured Future Infrastructure in disrepair, power grids at risk, rampant misinformation and genetic tinkering — is our world coming apart at the seams?

01b_cover_story_crackCrumbling Infrastructure: Day of Reckoning Our health and economy are increasingly exposed to a long-documented but ignored risk.

01c_cover_story_leadCyber Grid Attack: A Cascading Impact The aggregated impact of a cyber attack on the U.S. power grid causes huge economic losses and upheaval.

01d_cover_story_vaccineFragmented Voice of Authority: Experts Can Speak but Who’s Listening? Myopic decision-making fostered by self-selected information sources results in societal and economic harm.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]