Starting in 2021, Aanika Biosciences is launching an initiative to work directly with insurers, underwriting: recall, third-party liability and contamination policies in the food and agricultural sector. By subsidizing the cost of Aanika’s traceability technology, carriers can significantly reduce the cost and time associated with handling recall insurance claims. Initially, through institutional backing, Aanika will offer up to $10 million in “guarantees” to carriers, as well as conduct simulated recalls, in order to demonstrate the efficacy of the solution.
Foodborne illness impacts 48 million Americans every year, hospitalizing 130,000 and killing 30,000. Recalls cost the agricultural industry billions of dollars each year. The ability to rapidly identify the source of an outbreak is imperative for all the stakeholders in the supply chain. Determining who is the primary culprit, and not “collateral damage” is key. Currently, there is no simple way to determine the history of a piece of contaminated lettuce, and conventional investigations may take weeks. The diagram below illustrates the complexity in determining which farms in the supply chain have been contaminated and which remain safe.
As all leaves of lettuce are almost identical, there is no rapid method to determine origin. Even the FDA have expressed their frustration at this state of affairs in a 2018 update on an outbreak of E. coli O157:
“Traceback involves working backwards from the point of consumption or purchase of the product through the supply chain. It often includes investigating the multiple steps along the way. These steps can include suppliers, distributors and processors where the lettuce was chopped and bagged, and then back to the farm or farms that could have grown the lettuce that ended up in those bags. It’s a labor-intensive task. It requires collecting and evaluating thousands of records; and trying to accurately reproduce how the contaminated lettuce moved through the food supply chain to grocery stores, restaurants and other locations where it was sold or served to the consumers who became ill.”
Traceability is Important for Insurance Carriers
Tracing food contamination and recalls are an especially thorny problem for insurance carriers. Insurance rests on assigning liability. Take an example where you live in an apartment building. Imagine you come home one evening to a flood of water engulfing your carpets, damaging your furniture, soaking your electronics and destroying your personal belongings. You notice that water is leaking from the ceiling so you call a plumber to investigate. He inspects the apartment upstairs and finds that it too has been flooded but he cannot find a leaky faucet or any source of the water. He moves to the other apartments on the floor but cannot pinpoint the source of the leak. So he checks units on the next floor up, the next above that floor, the 20th floor — nothing. Imagine that after inspecting 100 water-damaged units they still cannot find the origin of the leak. It is not coming from the building or the roof either! Who would pay the insurance claims? Perhaps some of the tenants in the building have policies that will cover them in an absolute sense but perhaps many of the policies in the building will seek damages from the negligent party. Imagine a scenario where the carrier will not cover you because it claims that you could be the negligent party as there is no proof to the contrary. The point being that, without a clear and rapid way to determine origin, an otherwise simple system can resemble that of an M.C. Escher work.
And while the example above is unlikely to happen to you, this is exactly what happens during recalls in the food industry. Considering the average food and beverage recall costs about $10 million and there were 337 such recalls in 2019, this problem is non-trivial. Agricultural insurers have used a plethora of data sources such as remote sensing and satellite imagery to mitigate potential losses. The ability to capture faster, granular data translates into more accurate risk pricing and both reducing the probability of a payout and/or reducing the amount of a payout altogether. While a number of data gathering tools exist, the ability to gather traceability data, especially in a recall, continues to be time-consuming and inefficient, relying on growing and harvesting patterns for example. Blockchain technologies such as IBM Foot Trust only address the integrity of the data but cannot bridge the gap between the physical product and its digital barcode. There’s a need for a better solution.
A Unique Insight
“Working with the FDA to destroy thousands of pounds of contaminated seeds turned a passion project into a nightmare” recalled Aanika Biosciences co-founder and CEO Vishaal Bhuyan. It was 2016, and he had just launched a consumer packaged food product. When a shipment of seeds arrived riddled with insect debris, he found himself getting a crash course in supply chain vulnerabilities. “Going through the process of sourcing a niche agricultural commodity from farms in rural India, organizing trucking, shipping and warehouse logistics gave me first hand insights into how complex and fragile our food system is” said Bhuyan. “I began to imagine all the ways technology can improve and de-risk it.”
Bhuyan’s past experience has served him well in this effort. Before his foray into biotechnology he spent his career analyzing the insurance-linked securities markets. He has co-authored 3 books on the topic of insurance-linked securities for major imprints like John Wiley & Sons and FT Press. His first book was cited in an SEC report on oversight for the secondary markets for life insurance. Bhuyan has been an invited speaker at universities and conferences around the world, sharing his insights on how derivatives could be used to off-set risks associated with catastrophes, water scarcity, overfishing and aging populations. When later he became aware of how biological technology could be used to solve similar problems, Aanika Biosciences was born. Bhuyan sees the potential benefits of applying cross-disciplinary knowledge to supply chain challenges, enthusing “Aanika’s system is the culmination of 15 years of work that allowed us to uncover key insights that fall at the intersection between financial services and biology. We can prevent large-scale recalls and production shutdowns of whole sectors of products and prevent tens of thousands of pounds of food from being wasted unnecessarily”
Biotechnology for Supply Chains
Aanika’s biologically-based barcodes are safe for food use and can be applied directly to lettuce and other produce. Using Aanika’s technology, the farm of origin can be conclusively identified in under an hour, even if the produce has decayed or is mixed with other foodstuffs. Produce farm of origin can be identified even after washing, mixing, UV light exposure, heat, cooking and even decay, providing unparalleled traceability. With just a few drops of our biologically-derived tags mixed into post-harvest wash water, hundreds of pounds of romaine lettuce can be identified throughout the supply chain with close to single-leaf accuracy. Aanika’s readout technology reduces the time necessary to determine origin from several weeks to under an hour.
Aanika Biosciences is based in Brooklyn, New York and was founded in October 2018 to use microbially-derived barcoded ‘tags’ to track and trace goods through the supply chain. Aanika’s tags are naturally produced by a microbe currently designated as “GRAS” (Generally Regarded as SAFE) by the FDA and commonly found in healthy soil and on grasses and whose commercial uses currently include human probiotic formulations and animal feed. Aanika’s tags are nonliving particles containing encoded DNA barcodes. While the tags are the product of genetic modification, non-GMO versions of the tag can be deployed in certain situations within the United States. The edits made to the DNA carry no inherent functionality allowing them to be considered as a nonviable particulate processing aid. Due to the extremely small trace amounts of product used to tag goods, the use of Aanika’s technology would not trigger the need to label any product as GMO.
For more information about this initiative please contact Noah Dwora at email@example.com.