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Counterpane offers Internet security insurance
Ann Harrison
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July 12, 2000 (Computerworld) -- Counterpane Internet Security Inc. in San Jose announced this week that its clients will be able to purchase up to $100 million in insurance coverage to protect against loss of revenue and information assets caused by Internet and e-commerce security breaches.
Counterpane's standard warranty of service will be backed by Lloyd's of London and underwritten by insurance brokers Frank Crystal & Co. in New York and London-based digital risk solution provider SafeOnline.
Some insurers have offered policies that pay for security-related losses under loss-of-business or act-of-vandalism clauses, but these damages can be difficult to collect and often carry premiums that start at $100,000. Counterpane said it is the first security services provider to offer guaranteed, direct financial reimbursement for security-related losses at lower premiums.
David Tapper, a research analyst at Framingham, Mass.-based International Data Corp. (IDC), noted that a number of Counterpane's competitors, including Internet Security Systems Inc. (ISS), Hewlett-Packard Co. and IBM, have also recently formed partnerships with insurance companies. Tapper said this trend has helped push the creation of insurable models of security management that demonstrate risk reduction.
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"It will pressure the service providers to make sure that their systems meet certain security standards," said Tapper. "And it will give an incentive for them to provide higher levels of customer service and provide some assurance for customers."
Lloyd's security insurance covers the cost of repairing and replacing data or software following the destruction or corruption of electronic devices from an attack. It also covers lost revenue following a service interruption or service impairment caused by malicious hackers.
Extortion protection, which covers the cost of a specialist's assistance in a security crisis and any subsequent negotiation, including payment of a ransom demand, is also part of the package.
"Until now, the insurance industry has not had sufficient assurance of risk control from security companies," Bronek Masojada, CEO of Lloyd's insurer Hiscox, said in a statement. Masojada said Counterpane has proven through its Managed Security Monitoring service that it has "substantially reduced their clients' exposure to risk."
Mark Kadrich, director of security at Conxion Corp., a Santa Clara, Calif.-based Internet service provider and Web hosting company that is considering buying the policy, said it has taken awhile for insurers to have a clear risk model they can write policies against. "Here is a method for them to understand how the premium structure is going to work and how the risk factors are going to impact your data and information network," said Kadrich. "I think it's very interesting."
A number of security companies, including ISS, Network Associates Inc., Aventail Corp. and recently Axent Technologies Inc., have entered the managed security services market, which IDC has estimated will grow from $703 million last year to $2.2 billion by 2003. Counterpane launched in April.
Instead of monitoring firewall or intrusion detection systems, Counterpane offers managed, around-the-clock incident response services designed to help companies react strategically to security incidents. "Their most unique factors are name-brand security experts on staff and on their board, and the complete focus on security services -- not consulting, not products," said John Pescatore, an analyst at Gartner Group Inc.
Central to Counterpane's success is the reputation of its founder, Bruce Schneier, a world-respected cryptanalyst and creator of the Twofish encryption algorithm, which is a candidate for the U.S. government's Advanced Encryption Standard. Insisting that "security is a process, not a product," Schneier emphasizes continual monitoring by experts to catch potential flaws in security technologies and help companies make the most of their existing security products.
Outsourcing pricey but deemed cost-effective
According to Kadrich, it's well worth the annual $150,000 fee Conxion pays Counterpane for around-the-clock monitoring of its network. For what it would cost to hire one security manager to watch audit logs, analyze them and produce a report, Kadrich says he gets seven around-the-clock Counterpane security analysts who serve as an alarm system on his networks.
Kadrich said Counterpane swiftly detected a planned router attack in April conducted by Conxion's outside security auditors. "They called us up, had us verify that the attack was occurring, gave us information about where it was coming from and suggested cutting them out of the routers at the perimeter," said Kadrich. "If you have any hopes of using this information in litigation, you have to have a process that deals with system logs, audit logs and traps and use this information in day-to-day performance or it's considered hearsay."
Counterpane has two Secure Operations Centers that monitor customers' networks through encrypted tunnels. Sentry probes on customers' corporate networks collect audit information from existing security products, including servers, firewalls and intrusion detection products. Counterpane's Managed Security Monitoring (MSM) service provides teams of security analysts who conduct around-the-clock monitoring and develop counter-responses based on specific needs.
Counterpane's security analysts use the company's proprietary Socrates system to correlate network information with data on known attacks to prioritize events, pinpoint attacks and filter out false alarms. Socrates can be calibrated to monitor specific network configurations and maintains its own separate logs to prevent intruders from erasing logs to mask incursions. If an attack occurs, Counterpane initiates a preplanned procedure to contact the customer, stop the attack and close the security hole as quickly as possible.
Jim Adler, president and CEO of votehere.net, an online voting service, said Counterpane protects the company's credibility by securing the ballot boxes and protecting mission-critical applications. Adler added that Counterpane has the flexibility to filter for votehere.net's unique hardware configuration. "The key is availability," said Adler. "We have spent a lot of time on reliability and uptime, and having them monitor for intrusion is critical to us."
For more security coverage, visit our Security Community page.
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