September 5, 2022

Parametric insurance for ESG reputation. Parametric covers can help with emerging risks when conventional insurance is not available.

“Parametric Insurance for ESG Reputation. “The market for parametric insurance (for ESG-linked reputation risk, for example) is set to grow as corporates look for solutions to emerging and non-traditional risks … experts have told Commercial Risk.”

Financial Times
September 7, 2022

“Parametric covers can help with emerging risks when traditional risk transfer solutions are not available.”

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Parametric solutions, which pay out when a pre-agreed threshold on an index is reached, can help risk managers address today’s complex and fast-changing risk environment. ESG-linked reputation risk is top example.

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?