“ESG D&O Underwriters: “Businesses face growing legal threats from activists looking to challenge sustainability claims deemed disingenuous or untrue, and decarbonisation targets considered too weak to protect shareholders from future climate-related losses. […] “Environmental, social and governance [issues] are very much on the agenda of D&O underwriters,” with environmental concerns “a new and major issue,” said David Powell, head of technical underwriting at the Lloyd’s Market Association, which represents insurers in the market.”Financial Times
September 7, 2022
“Climate-related legal action threatens to push corporate insurance costs even higher…”
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ESG and D&O Underwriters: ESG-linked reputation loss insurance is a necessary element of a thoughtful ESG strategy.
Reputation value is a strategic power companies use to sell more, faster, and at premium prices; and to obtain labor, vendor services, as well as capital on preferred terms.
Steel City Re mitigates the hazards of ESG (reputation) risk that threaten reputation value. We use parametric reputation insurances, ESG insurances, and risk management advisory services to make our clients reputationally resilient.
Risk management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive Steel City Re reputation risk governance and management solution.
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Context and Background
Risk managers are now central to the process for managing risks to reputation and that’s a process marketers and communications professionals need to be a part of. The oversight of reputation risk management is mission-critical.
Courts have increasingly been ruling that reputation is a mission critical function and oversight of its management is a responsibility of the board of directors. Courts are also ruling that marketing statements companies make – if they related to issues that affect their reputation, like ESG – may be considered material by investors. Litigation along these lines has yielded large settlements or verdicts for plaintiffs.
The SEC has proposed new rules requiring disclosures by public companies related to their ESG activities; those statements could become a communications and reputational minefield.
As a result, reputation risk management is evolving into an intelligence gathering operation spanning the entire enterprise, roping in the enterprise risk manager, compliance counsel, and increasingly, reporting up to the Chief Legal Officer. There is a growing recognition that reputation is not a product merely of marketing and media coverage, but of the degree to which stakeholders’ expectations are aligned with actual performance. The reputation risk management process requires a thorough and ongoing analysis of stakeholder expectations, the risks of disappointment, and a plan for either managing those expectations or assessing and insuring against the cost of failure.
One Last Question
ESG-linked reputation risks are prevalent and material. Are ESG insurance and reputation insurance part of your strategy?