April 1, 2018

Steel City Re also provides risk mitigation, risk transfer and risk financing tools to help policy-holding companies meet stakeholders’ expectations. Along with D&O culpability insurance and reputation catastrophe insurance, the company offers captive insurance solutions to guard against potential losses and satisfy regulatory requirements and a corporate board solution that Kossovsky calls “shark repellent” against activist investors.

“Reputation resides in the minds of stakeholders, whose behaviors have economic impact throughout a company’s P&L [profit and loss] and who may become angry when their expectations aren’t met, change their behaviors and cause economic harm,” Kossovsky said. “Reputation is an expectation they hold and reputation risk is the threat of economic damages when those expectations aren’t fulfilled.”

“Much like directors and officers liability insurance in the late 1980s, reputation risk insurance is becoming a necessity,” said Steel City Re CEO Nir Kossovsky. While reputation risk is often viewed as a threat to an intangible business asset, the peril can have very tangible impacts— on revenue, sales, market cap, brand value, customer and investor relationships and talent, Kossovsky said.

Until recently, specialized insurance policies
to protect that asset were offered by only a handful of carriers, primarily in the U.K. But more carriers in the United States and globally are now adding risk management services and stand-alone reputation risk policies onto their books.

“Taking Cover,” by Lori Chordas, A.M. Best’s Review, April 2018. Reputation is a valuable corporate asset. As much as three-quarters of a company’s value is tied to its reputation, the Economist Intelligence Unit reports.

April 1, 2018
Best’s Insurance News

“Much like directors and officers liability insurance in the late 1980s, reputation risk insurance is becoming a necessity.”

Reputation insurance: indemnification affirming trust and reducing economic losses.

Reputations are valuable strategic intangible assets. Threats to these assets⏤ enterprise reputation risks, often mislabeled “brand risks” ⏤ need to be managed, and management needs to be overseen through reputation risk governance lest reputational damage or reputational harm result in long-tailed go-forward losses in economic value and/or political power. Because these intangible risks arise from the interplay of stakeholder expectation, experiences, and media amplification, parametric insurances for intangible asset risks, for reputational value, for reputational harm, and for reputation assurance help mitigate risk by telling a simple, convincing and completely credible story of quality reputation governance to stakeholders. This story telling effect is the expressive power of insurance complementing insurance’s better known instrumental power of indemnification.

Risk management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive solution. What’s your strategy?