Digital Earthquake Insurance Debate

By Elana Varon, CIO |  Government

THE INSURANCE INDUSTRY CAN'T be expected to pay if the whole Internet shuts down,
says Frank Wisner, vice chairman for external affairs with commercial insurer American
International Group. So he's asking information execs to lobby taxpayers for an
insurance program modeled after the Federal Deposit Insurance Corp. (FDIC) that's been
guaranteeing your bank deposits ever since the Great Depression.

Wisner told more than 100 corporate auditors and CIOs gathered at a White House
conference earlier this spring that the government should become "the reinsurer of last
resort in case of a digital earthquake," just as it steps in to heal businesses that
suffer from natural disasters. The Commerce Department's Critical Infrastructure
Assurance Office -- the group in charge of rallying government agencies and industries
to be more vigilant about network security -- agrees that a public safety net has
merit. But John Tritak, the CIAO director, says the private sector would have to drum
up sufficient political support for the idea.

Federal insurance could protect businesses -- and the economy -- from huge losses
from a cyberwar. Such protection could be hard to get in the private market, says
Marshall Acuff, equity strategist for investment bank Salomon Smith Barney Holdings.
But Acuff worries that the promise of a federal bailout would discourage companies from
taking proper precautions. Even a plan modeled on federal banking insurance through
the FDIC might not fly because companies wouldn't want to invite the same kind of
government scrutiny that banks get in exchange for protection.

"Most corporate folks would say they don't want the government in anything
else," says Thomas Horton, who chairs the National Association of Corporate Directors.
Horton thinks the feds would probably come to the rescue in a disaster anyway, if
enough damage were done. "They bailed out Chrysler," he points out.

No New Net Taxes for Now

ON MAY 10, Congress extended the Internet sales tax moratorium from 2001 to 2006.
The moratorium is the only point about Internet taxes most lawmakers agreed on after
the Advisory Commission on Electronic Commerce issued a politically inconclusive report
in April. Meanwhile, Sen. Ron Wyden (D-Ore.), the Senate sponsor of the current
moratorium, is pushing a compromise he thinks would "break the gridlock" on the issue
by kicking it over to state governors.

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