Cyber Risk

Hacking the Food Supply

Cyber exposure is a growing concern for farms and agribusiness companies of all sizes.
By: | March 27, 2018 • 7 min read

As agribusiness companies large and small leverage new technologies to increase yields, ease labor strains and maintain a competitive edge, cyber risk has become a growing concern in what was once perceived by many as a relatively low-tech industry.

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“When people generally think about agribusiness, they think about a farmer sitting on a tractor, driving it through his field,” said Stephanie Snyder, senior vice president and national sales leader of cyber insurance at Aon Professional Risk Solutions.

But increasingly, even small- and medium-sized farms are dependent on satellite imagery, drones, smart tractors and other tech.

“It’s not your grandpa’s farm anymore,” said Snyder. “Farming and agricultural organizations are really quite advanced from a technology standpoint.”

Each added device and connection means a greater attack surface for potential cyber security breaches.

“The cyber security that has been applied to a lot of these remotely connected devices is not the best cyber security in the world,” said Michael Born, vice president in Lockton’s Cyber Technology Practice.

Stephanie Snyder, SVP and national sales leader, cyber insurance, Aon Professional Risk Solutions

Scott Stransky, assistant vice president and principal scientist at AIR Worldwide, said users often don’t change their devices’ default passwords. “If you don’t change the default password, you’re basically inviting attackers in,” he said.

As is often the case with industry-specific devices, Stransky said, “There are systems in agriculture that only run on older and less secure operating systems that simply can’t be updated if they want the system to work properly. Hackers can use those vulnerabilities.”

Devices themselves can also be vulnerable to theft. “Drones are valuable,” said Born. “To the extent that I can interrupt your signal and have a drone come to me instead, that’s potentially an easy way for me to steal a piece of valuable property.”

Drones can also present liability risks by violating neighbors’ or others’ privacy rights, or interfering with aircraft.

More common than targeted attacks are problems caused by malware or ransomware, sometimes as a result of phishing attacks.

In other industries, the biggest cyber risk is data breach, and that can be a concern for biotech and chemical companies protecting sensitive trade secrets.

But while farmers may expose their personal or business data, the bigger risk is operational: What could happen if control of all those networks and devices are interrupted or even hijacked?

“In 2018, the focus is more on operational technology,” said Snyder.

“As these organizations are using more and more technology to run their business, if there is some type of breach of that technology, what is the impact to that organization from a balance sheet standpoint, from a financial loss standpoint?”

For farmers who have automated their irrigation, fertilization, harvesting, refrigerated storage or livestock management, such operational interruptions could be devastating.

“If the interruption lasts for any significant period of time at all, say days or even a week, then you could have serious effects on an agribusiness because of the nature of that business,” said Born.

Currently, such losses generally aren’t excluded.

“Once we start to talk about physical damage or livestock injuries or crop destruction, we’re now in the realm of what we call ‘silent cyber,’ where there actually is quite a bit of insurance being written today that doesn’t explicitly exclude cyber as a cause of loss, and doesn’t say it doesn’t include it either,” said Stransky.

“It’s literally silent on whether it includes cyber. And there’s very little legal precedent for whether or not the cyber-induced losses will end up having to be paid. The assumption is that they will, because they are not explicitly excluded.”

Michael Born, vice president, Cyber Technology Practice, Lockton

Major losses from cyber risks have been largely theoretical in the agriculture sector, and as long as they remain so, they most likely won’t be excluded.

“These policy wordings are not really changing due to cyber yet,” said Stransky. “It may take a very large event to spur that on, and then I think you’ll see a great number of companies changing.”

Born is not so sure. “Given the market that exists right now, coverage is broadening and not narrowing, so it’s less likely to happen.”

But he also sees events in other sectors impacting coverage in agribusiness.

“A lot of times these changes in insurance coverage happen globally for a company on all similarly written policies,” said Born.

“Since we’ve seen a couple of large losses on some of the manufacturing and transportation industries arising out of some of these attacks, insurance companies in general are starting to take a close look at what they do and do not cover from a property standpoint.

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“It’s a really hot topic in the insurance industry today: where is this coverage going to fall? If you have a cyber attack that causes property damage or bodily injury, where does the coverage fall? Does it fall on the property policy, the general liability policy, a dedicated cyber policy? Are there gaps in between those?”

Either way, Snyder sees other benefits to cyber policies.

“Cyber insurance policies are going to indemnify the organization for the net income loss they have, as well as extra expenses that they incur,” she said.

“And cyber insurance actually takes that one step further. You can have business interruption indemnification under the policy, not just for a breach of network security but also if you have a technology failure.”

Such coverage can also indemnify for costly computer forensics and remediation.

“Something that we work with our clients on is doing risk quantification modeling,” said Snyder. “Essentially helping our clients determine the financial statement impact or potential loss if they were to have some type of breach that resulted in an outage and an interruption.”

Born noted that, “A lot of insurers out there are offering risk management services along with cyber policies, and these are pre-breach services.”

But he recommends keeping your broker up to date. “If there is a change in operations that could have an impact on this type of exposure, then certainly they should talk to us and we should reevaluate that exposure, mid-term if necessary.”

“It’s not your grandpa’s farm anymore. Farming and agricultural organizations are really quite advanced from a technology standpoint.” — Stephanie Snyder, SVP and national sales leader, cyber insurance, Aon Professional Risk Solutions

Interruptions due to a cyber breach can also have impacts far beyond the farm directly affected.

“We’re talking about the beginning of the supply chain,” said Born. “… If their operations are interrupted and they don’t have the produce or the livestock to provide to the other folks along the supply chain, it’s going to affect all of those businesses.”

“Supply chain insurance is out there,” said Stransky, “but the take-up rate for supply chain insurance is really low.”

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

“You don’t typically buy insurance for bad things that happen to other people,” said Born. “You buy insurance for bad things that happen to you or your business.”

But with cyber risks threatening every link in the supply chain, that may no longer be the case.

“Even if nothing happened to you and nothing was your fault, if your supply is interrupted because of a cyber attack or other perils, that affects your ability to do business and to make income, we can cover that exposure for you as well,” said Born.

But, he added, “That starts to get into aggregation issues, which is something we’ve been talking about for a while when it comes to cyber, but is particularly relevant when you start insuring events that could happen to another party.

“If that same party supplies many different companies and all of those companies have the supply chain insurance, you have some real aggregation issues.”

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While coverage is obviously important, even more important is avoiding vulnerabilities in the first place.

“It’s all about the people and their vigilance against the cyber attacks,” said Stransky. He emphasizes the importance of changing default passwords, being wary of phishing attempts, and hiring a trusted IT professional to set up equipment and explain how to maintain it.

But ultimately, Born sees cyber coverage becoming another basic cost of doing business.

“I think some form of cyber coverage will become more or less standard coverage for most businesses at some point in the future,” said Born.

“And I don’t think agribusiness is going to be any exception.” &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He 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 and 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]