As Cyber Crime Intensifies, Focus on Critical Exposures

Cyber crime is hitting its stride, while global political tensions add complexity to an already challenging cyber security environment.
By: | March 14, 2019 • 11 min read

While most industries are trying to weather the tides of political instability, economic constraints, trade volatility, regulatory changes and talent shortages, one industry appears to have rapidly risen above it all: the world of cyber-crime.


Cyber criminals are now pocketing an estimated $1.5 trillion annually — five times the approximate cost of natural disasters in 2017 and $500 billion more than U.S. insurance industry net premiums written in 2017, according to S&P Global Market Intelligence.

Business leaders see cyber-attacks as their single biggest threat — bigger than terrorism, the threat of financial crisis or climate change. That concern is well placed. The Darknet has democratized crime, enabling cyber-crime-as-a-service to thrive. Non-hackers can hire criminal experts almost as easily as choosing a plumber from Angie’s List. For would-be criminals with a DIY mentality, the Darknet has handy kits packed with everything a fledgling criminal needs to embark on a lucrative career.

“There are so many resources out there for cyber criminals,” said Dan Frusciano, senior vice president, IronPro. “You can buy malware kits on the black market for a couple of thousand dollars. There’s a huge market for this.”

Kelly Geary, managing principal and U.S. cyber practice leader, EPIC

And despite the rapid development of security technology and strategies, cyber defenders are still relatively outgunned when measured against the sheer scale of the threat.

The breakneck speed of growth in connected technology certainly hasn’t helped. Organizations are more vulnerable than ever, thanks in part to an ever-expanding attack surface. By 2025, the number of interconnected devices in the world is projected to exceed 75 billion, opening up virtually endless opportunities for criminals to attack.

Worse, more than a few of those devices “are being rushed to market where security is a little bit of an afterthought,” said Garin Pace, cyber product leader – Financial Lines & Property for AIG. “And I think that’s a disturbing trend.”

And the potential rewards make cyber crime an irresistible draw for the opportunistic.

“The financial motivation for cyber criminals to perpetrate a ransomware attack, for example, are exponentially larger than any financial motivations we could have to try to defend against it,” said Kelly Geary, managing principal and U.S. cyber practice leader with EPIC Insurance Brokers & Consultants. In fact, a 2015 report placed the ROI for ransomware operations at an estimated 1,425 percent.

Combined with relatively low risk, these factors make cyber crime the worst kind of perfect storm, said Geary. “It’s essentially an anonymous criminal act. It has no geographic limitations. It has a very strong financial motivation. And on the other side of it, whether you’re talking about law enforcement, about IT professionals, about large or small organizations — they simply don’t have the resources or the skills to respond. We’re so far behind the eight ball. And I think that’s going to be a big issue in the coming year.”

“Unfortunately, businesses are not learning fast enough to cause the criminals to do something different,” said Pace. “They’re still using phishing and malware, and they’re taking advantage of stolen credentials. [Meanwhile] there are businesses still leaving lots of data unsecured.”

New Twists on Old Strategies

With experience and advanced technologies, criminals have found ways to improve upon already effective attack methods such as social engineering and made them increasingly difficult to defend against.

Experts reported a spike in social engineering schemes where attackers insert themselves into legitimate transactions between companies and their clients or vendors.

“We’re seeing that on some of our lines of business, especially real estate, where they’re getting targeted around closing time,” said Frusciano. Attackers might slip into an email thread about a down payment and inform the buyer that the bank set to receive the down payment has changed, and neither party will be the wiser.

“That was a huge 2018 loss, and I think it’s going to continue for a while,” he said.

Even for the astute, spoofed communications are harder than ever to tell from the real thing. AI, machine learning and natural language processing have ushered in a new era where emails can perfectly mimic a target’s writing mannerisms, and even a phone call can be faked well enough to convince a skeptical accounting employee that he or she is taking wire transfer orders from the boss.

“AI and some of the other emerging technologies are creating a risk-reward equation for cyber criminals that is so much more favorable to them than it already was.” — Kelly Geary, managing principal and U.S. cyber practice leader, EPIC

AI-powered technology like deepfake video has the potential to dupe someone into thinking they’re talking to the boss face-to-face. While it hasn’t yet been utilized in a successful social engineering scam, it’s probably only a matter of time.

“AI is definitely a strong capability that allows the attacking organizations to process a lot more data and glean interesting insights from it in a better fashion,” said Ofer Israeli, CEO of Illusive Networks. “I think it’s being utilized quite widely — it’s providing value.”

“AI and some of the other emerging technologies are creating a risk-reward equation for cyber criminals that is so much more favorable to them than it already was,” added Geary.

High confidence in the appearance of authenticity is emboldening criminals to try for ever-higher bounties. Under the guise of completing a foreign acquisition, attackers pocketed $18.6 million this past November from the Indian branch of energy, chemical and engineering research firm Tecnimont S.p.A.

Ransomware attackers are also switching things up to maximize their profitability, analyzing targets and setting ransom amounts based on company characteristics.

“They’re scoping around the network to determine what the proper ransom amount should be,” explained Frusciano. “You know it’s ‘this company doesn’t have good backups. We can tell that they’re doing XYZ revenue a day. We’re going to ask them for $1.2 million’ where maybe it [would have been] $25,000 in the past.”

“We’ve seen the demand go up,” agreed Jeremy Gillespie, area vice president – Midwest cyber team leader with Gallagher, citing the case of a client who’d received a $700,000 ransom demand “and that was after they brought in a specialized firm to negotiate. So the demand was probably even higher at some point. We’ve heard stories of ransom demands over a million dollars.”

As demands rise, so do the stakes. Increased reliance on IoT and automation and industrial control systems has opened new doors on what criminals can accomplish using more or less the same methods.


In 2017, guests at a luxury hotel in Austria discovered their key cards no longer worked. Hackers had infiltrated the key card system, demanding payment in order to release it. With the hotel at full capacity at the beginning of the ski season, it took only 90 minutes for the hotel to choose to pay their attackers.

A recent attack on the Los Angeles Times, thought to be related to the Ryuk ransomware virus, disrupted the delivery of the Los Angeles Times and Tribune newspapers across the entire U.S.

“Now they’re causing varying impacts,” said Pace. “We used to worry about ‘Oh, they’re going to steal my data or they’re going to ransom my data to make some money.’ Now [criminals are thinking] ‘why go after your data when we can ransom your entire system’ — the system you need to create widgets or to run your hospital.”

Other variations on the ransomware approach appear designed to capitalize on companies’ increasing sensitivities around reputation. A type of attack quirkily named “badness planting” doesn’t require malware or encryption. Instead it involves placing damaging or embarrassing material such as emails, photos or videos somewhere in a company’s PCs and servers and making demands in exchange for the removal of the files. Even if the damaging material is fabricated, victims still face significant risk.

“Even if you could ultimately determine that it was false, has the damage already been done?” said Geary. “Even if the [victim] says ‘well, this isn’t me, you can’t prove that this is me,’ it will certainly look that way. You can fight against it after it’s released, but how will your reputation hold up?

“If you’re looking at it from an insurance or risk analysis standpoint, how do you protect against that?”

Geopolitical Threats on a Growth Arc

While profit remains the primary driver of most attackers, several of the most dramatic incidents in recent years were designed for mayhem.

NotPetya, originally assumed to be a form of ransomware, disrupted everything from banks to shipping companies and nuclear facilities in numerous countries. Russia is believed to be behind the attack even though officials deny it.

The WannaCry ransomware campaign, believed to be the work of North Korea, hit computer systems worldwide, spreading chaos from the UK’s National Health Service to U.S. hospitals and Russian banks.

Garin Pace, cyber product leader – Financial Lines & Property, AIG

Russia, China, North Korea and Iran are known to have cyber arsenals that are of increasing threat to the West. But U.S. intelligence officials reported in January 2017 that more than 30 countries are developing offensive cyber attack capabilities, raising the specter of business interruption as well as physical damage across critical infrastructure, including energy, transportation, health care and more.

“Over the next five years, technological change will only accelerate the intersection of cyber and physical devices, creating new risks,” officials wrote.

“We see more actors out there today that we believe have the capability or are developing the capability to really understand some of those cyber-physical interfaces and reach across and cause those kinds of disruptions in the tangible world,” said AIG’s Pace.

“And you see fewer norms restricting them from doing so. There have been some incidents where critical infrastructure was targeted. Power was targeted in the Ukraine. There was an attempted attack [where] the only possible motive to carry out the attack that way was to cause massive destruction at a petrochemical processing facility. It is becoming acceptable for those types of attacks to happen.”

What’s more, it raises the possibility of “leakage” from nation states to cyber criminals, said Illusive Networks’ Israeli.

“Many countries have a cyber command and a whole cyber strategy … which means they’re investing a lot of energy in providing very sophisticated threats of zero-day exploits and things of that nature. Part of the challenge the world has in cyber is that if something is out, it’s out, and it can be utilized by a different threat actor pretty easily. So if I’m a cyber criminal and I get hold of something that Iran has developed, I can weaponize that very quickly and use it.

“There’s definitely spillage to more threat actors, so pretty advanced capabilities are out there in the hands of many different people.”

Focus on What’s Manageable

Carriers have a sharp eye on all of these risks, including the potential for a significant attack on a cloud service provider, and the impact of aggregation risk within their own portfolios.

“From our perspective, the biggest concern is around aggregation,” said Matthew Honea, director of cyber for Guidewire Cyence Risk Analytics. “No one wants to have a cyber hurricane, a cyber earthquake, catch them off guard. It’s a matter of understanding where are the fault lines, where are the hurricane paths? Vulnerabilities are going to be growing every year.

“So they need to identify where the software lies, what service providers they rely on and diversify their risk, because it only takes one vulnerability, one outage, to really cause a lot of damage to an insurer’s portfolio,” said Honea.

“We used to worry about ‘Oh, they’re going to steal my data or they’re going to ransom my data to make some money.’ Now [criminals are thinking] why go after your data when we can ransom your entire system — the system you need to create widgets or to run your hospital.”  — Garin Pace, cyber product leader – Financial Lines & Property, AIG

Still, carriers want risk managers to keep a sense of perspective about the growing cyber threat level and focus on the exposures they can impact.


“The majority of incidents are attackers looking to make some money,” said Pace. “They don’t even necessarily go looking for your company name, they go looking for someone who is vulnerable.”

“It’s always going to be a battle between the threat actors and the companies that are trying to ward off the attacks, detect them and stop them,” said Gallagher’s Gillespie. “But a common point that is never going to go away, whether you get the best security available or not, is always going to be the human element. There are always vulnerabilities in the system because of mistakes made, the social engineering attacks, the spearfishing.

“[What’s important] is finding ways to address those weaknesses — by training, by awareness, by two-factor authentication, by doing all of that. That’s the best thing that you can do to stop the attacks.”

“It has to start with what is important for your business,” said Israeli. “What are the critical risk factors for your business specifically? What types of threat actors would be after this type of business data or system, and then how do you measure that risk in a way that’s applicable to those specific threats?

“We see that as a huge gap that many organizations haven’t addressed. They’ve been looking at it in more of a generic kind of fashion, saying, ‘Let’s protect it all, 360 degrees, 365 days a year,’ and frankly that’s not really working.” &

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.


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.


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?


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.


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.


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]