February 4, 2019

While Steel City Re, for example, offers parametric policies, which pay a pre-agreed sum upon specific triggers linked to reputation metrics being met, AIG’s product is primarily designed to assist with crisis management (though it did recently update the policy to include an income protection feature).

“The greatest challenge for the industry in quantifying reputational risk is the prevalence of simplified notions of the peril. Like fraud risk, reputation risk is a complex peril that has multiple contributing factors, and its going-forward costs are far greater than losses that are immediately appreciated.”

According to Dr. Nir Kossovsky , CEO, Steel City Re, which brokers dedicated reputational risk insurance solutions in partnership with Lloyd’s syndicate Tokio Kiln, reputation can be defined as an expectation of behavior. “Its value is measurable, and therefore it is manageable and insurable,” he said.

February 4, 2019
Risk & Insurance

“Wall Street will forgive you for an uninsured earthquake loss or a terrorism event, but it will not forgive you for operational failures that affect your reputation.”

Reputation risk management begins with reputation risk governance.

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?