High Net Worth

High Net Worth Households are at High Risk for Cyber Attacks: Cyber Monitoring Protection is Now in Play

High Net Worth individuals and households are increasingly buying cyber monitoring services.
By: | June 1, 2018 • 6 min read

Two of the most dynamic trends in insurance today are emerging cyber risks and the growth of the high net worth category. But until recently, the space where these trends meet has been underserved. This at a time when cyber risk for high net worth families is intensifying.

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“As hackers and cyber crime increases, the high net worth are going to become more of a target,” said Kurt Thoennessen, vice president of Ericson Insurance Advisors.

For insurance purposes, given their assets, high net worth families have exposures at least the size of many small companies.

“The ultra high net worth are both people and also a series of mini businesses,” said Martin Hartley, executive vice president and chief operating officer of PURE group of insurance companies.

“There are foundations… family offices. There are homes in different countries, there are multiple lines in the U.S. with… access to various networks.”

But while their attack surfaces can be similar, the risks they face can be quite different, and the nature of those risks is changing.

“Generally speaking ID theft has been the most prevalent of the cyber threats to the high net worth space at this point, but I think that’s going to change,” said Ericson’s Theonnessen.

Hartley agrees. “The social engineering or targeting of wealthy folks is very, very specific spearfishing, looking at transactions that are happening, identifying people who are wealthy or neighborhoods that are wealthy, and going after them,” he said.

One of the most devastating is an increasingly familiar social engineering attack, in which bad actors using various cyber and non cyber means insinuate themselves into correspondence involving financial transactions, disguising themselves as legitimate participants in the transaction and inducing other parties, either high net worth individuals or their approved subordinates, such as personal assistants, to send funds, sometimes millions of dollars, to illegitimate destinations.

Since an authorized person made the transaction, banks generally won’t accept liability, nor is it covered by most traditional cyber policies, which tend to focus on identity theft, data breach and cyber bullying. To the extent that it is covered, limits have historically been well below the levels of likely damage.

But a new generation of family cyber coverages is stepping up to fill this gap, with higher limits, fraud coverages, and innovative partnerships with cyber monitoring firms to help reduce risk.

“There is coverage for it through some of these new cyber products that are coming out,” said Thoennessen. “But there’s only three to my knowledge, with others being developed feverishly to get them out there, because there’s so much buzz around this topic.”

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Perhaps the most innovative of the three is Starling, from PURE.

“This is not a cyber product per se. This is a fraud product,” said Hartley.

“The reality of today is that most stuff takes place online or involving the transfer of data, that’s just life. So the product is fraud; it happens to take up both the traditional form and what is more commonly taking place online.”

Starling offers limits up to $1 million to members who enroll in an active monitoring program through a partnership with a company called Rubica.

“You put an app on your phone, on your laptop, on all your endpoint devices. It creates a V.P.N. connection through our operations center, where we can keep your traffic secure,” explains Frances Dewing, Rubica’s co-founder and CEO.

Rubica checks all traffic against open source and proprietary blacklists of potentially problematic servers, but more importantly, they also monitor against any anomalous behaviors.

“If we see something that doesn’t look like you, it’s just traffic that could be not necessarily on the blacklist, but it’s unlikely part of your normal pattern, we flag it and we have a human team of experts look at what that is and determine if it’s safe or not,” said Dewing.

Kurt Thoennessen, vice president, Ericson Insurance Advisors

“In order for us to put out a high limit of insurance for our members, we need some assurance that they’re taking appropriate steps to protect their cyber world… And that’s where Rubica comes in,” said Hartley.

The offering has been very popular. “We’ve got about half of our eligible membership who are choosing to purchase the coverage. And about half who are not,” says Hartley. “So that’s a pretty remarkable success.”

“PURE is an innovator,” said David R. Russell, Sr. Vice President and National Sales Leader, Marsh Private Client Services. “They do an exceptionally good job of identifying gaps in the space and how to bring a more robust solution to clients.”

Chubb and AIG are also offering cyber coverage for High Net Worth families.

“Chubb’s Masterpiece homeowner and personal liability policy addresses several cyber risks including: digital content coverage; unauthorized charge reimbursements; document recovery; coverage for allegations of unintentional online libel, slander or invasion of privacy; and, coverage to help you recover from identity theft,” says Patrick Thielen, Senior Vice President, Chubb’s North America Cyber Practice.

Launched earlier this year, Chubb’s new cyber endorsement is currently available in 18 states, with more on the way.

“Most clients can purchase maximum annual limits ranging from $25,000 to $250,000, and in some cases, we can offer higher limits,” said Thielen.

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Chubb offers its clients complimentary cyber vulnerability analysis by the Ackerman Group, and through a partnership with Norton, the opportunity to protect personal information on connected devices with a secure, high-performance Wi-Fi router.

AIG’s Family CyberEdge was launched in January 2017. “At the time, this coverage was the first comprehensive personal cyber insurance product to become available in the market,” said Anna Brusco, Vice President, New Product Development, AIG Private Client Group.

Family Cyber Edge offers coverage up to $250,000, but, Brusco adds, “We will continue to evaluate our coverage limits as we gauge our clients’ appetite.”

AIG partners with K2 Intelligence, a global investigative and consulting firm to help assess and remediate clients’ vulnerabilities, and with Cyberscout to monitor, mitigate, and manage against identity theft.

“In the event a personal computing device is breached such as through a social engineering scheme, we would provide assistance with restoring data and cleaning devices and would cover those costs,” says Brusco. “Family CyberEdge acts as a complement to another insurance coverage provided by AIG Private Client Group that provides coverage for financial loss as a result of fraud committed digitally.”

While PURE’s Starling is the only product that requires participation in cyber monitoring to be eligible for coverage — and only at the $1 million limit — Hartley doesn’t think it will be alone for long.

Anna Brusco, vice president, New Product Development, AIG Private Client Group

“I’m sure that there will be an evolution that more insurance products will have requirements around the standards you maintain in terms of cyber hygiene,” he said.

With the growth of the high net worth sector, demand for such products is almost certain to grow. “There’s 51 million Americans right now that have a million dollars in investable assets, which is kind of the tier at which high net worth is defined,” said Jason Hogg, Leader of Aon Cyber Solutions and Chief Executive Officer, Stroz Friedberg. “And that’s growing on a compound annual growth rate of 8 percent.”

According to Thoennessen, such products are very likely on the way.

“This is a real risk for everybody and so I’m sure [many other companies] will follow suit shortly,” said Thoennessen.

“Verisk, which is a company that develops product policy language and product language for these types of products, announced a month or so ago that they came out with a cyber risk policy for small commercial for all fifty states, and so I’m sure they’ll follow with personal lines products shortly after that.” &

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 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]