More questions, no common ground
Anonymous. National Underwriter. (Property & casualty/risk & benefits 
management ed.). Erlanger: Sep 29, 2003.Vol.107, Iss. 39;  pg. 34  (weekly)


Two years after the World Trade Center attacks, some of the most disturbing 
questions about dealing with terrorism have come from activities related to 
the financial services industry.

Recent news of the now-junked plan by an arm of the Pentagon-the Defense 
Research Projects Agency-to set up a futures market that would have allowed 
speculators to sign onto the Internet and bet on the probability of terror 
strikes and assassinations-caused a hurricane of controversy.

If you're like me, when you first heard about this, you gasped in horror 
upon reading or hearing a description of this program.

Once news of the program came to light, politicians branded it as 
"unbelievably stupid," "just wrong," "an egregious error in judgment," and 
"sick."

New York's Sen. Hillary Clinton called it "a futures market in death."

Less emotional critics pointed out that such a futures market could invite 
terrorist groups to plan attacks and make a profit at the same time, based 
on their "insider-trading" knowledge.

The media had a field day with the plan's architect, John Poindexter, noting 
that he was also the national security advisor to President Ronald Reagan 
during the Iran-Contra scandal. Several news articles also pointed to Mr. 
Poindexter's role in a "Total Information Awareness" project last year that 
would have allowed the Pentagon to scan the electronic transactions of 
individuals to look for patterns of suspicious activity.

Unexpectedly, however, after the storm of criticism died down, the 
commentary that followed in subsequent weeks-in publications like Business 
Week-suggested that there were useful elements in the controversial plan. 
("Betting on Terror: PR Disaster, Intriguing Idea," Aug. 25.)

Detailing what it called the "most acceptable version" of a plan that 
apparently went through a series of revisions, the Business Week article 
said that the betting would have been limited to invited experts from 
government, academia and industry, as well as to small wager amounts, to 
prevent profiteering. The article suggested that this plan would result in 
"a constantly evolving forecast" from experts.

Sorry folks. My reaction was the same as Sen. Clinton's. But I still can't 
help drawing a parallel to another futures market-and worrying a little more 
about something that honestly had never crossed my mind before.

While I realize that there is a world of difference between a terrorism 
futures market and a catastrophe futures market-Mother Nature, after all, is 
not a speculator and can't game the system-there are some uncomfortable 
similarities. In a sense, we have investors "betting on death and 
destruction" with cat bonds, too. And while there's more property damage 
than casualties during a hurricane or earthquake, the devastation of such an 
event is certainly horrible.

Those who saw the aftermath of Hurricane Andrew often referred to it as 
looking like a war zone. Yet, I doubt that any of us, in this industry, 
rejected cat bonds because of a distaste for the idea of profiting from 
destruction.