Short Takes: Study: Insurance Firms Face Third-Party Bugs

Even if insurance companies are prepared for year-2000 computer problems within their organizations, they could be exposed to trouble from outside sources, according to a new study.

"Insurers and the Year-2000 Computer Bug-the Tower of Babel Revisited," a study from industry research group Conning & Co., Hartford, warns that the systems of third-party partners could pose a threat to insurers.

"Even though the insurance companies in general seem to be in good shape in fixing their own systems internally, they are still exposed to counterparty risk," said Mark Trencher, a Conning consultant who wrote the 63-page study.

"Every organization is interrelated with other entities electronically," he said.

To minimize the risk, the report says, insurance companies must understand how the problem will affect business partners, suppliers, vendors, the government, and other third parties.