“Reputation is a product of expectations. Often misunderstood and inadequately addressed, reputation risk is the peril of economic harm from leaving stakeholders disappointed and angry. Negative media and social media coverage often amplifies that disappointment and anger. When reputational crises occur, they impact businesses commercially and financially, and their leadership personally. […]Vermont Captive Insurance Association
A captive program can be an effective vehicle for insuring reputational risk. A captive is in the unique position of being able to fund potential losses associated with stakeholder anger and disappointment, and by doing so signal to stakeholders that the company’s governance apparatus is aware of the peril, but is confident that it is managing the risk well. If the captive is at least partially reinsured in the open market, it also demonstrates that an objective third-party has reviewed the company’s practices and is essentially “warrantying” the company’s governance.”
September 13, 2019
“Losses are greatest when they are perceived by stakeholders …to be failures of governance.”
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Reputation insurance sends a message to the markets about the quality of governance, affirms trust, and reduces economic losses.
Risk governance and management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive enterprise reputation risk solution.
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