Newsworthy

February 28, 2023

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Companies need an authenticated forward-looking oversight process to manage risk strategically.

“For the first time since its landmark Caremark decision, the Delaware Chancery Court has allowed a breach of oversight claim to proceed against a corporate officer when it declined to dismiss claims brought by stockholders against David Fairhurst, McDonald’s former head of human resources…”.[kos] The bottom line is that law and society are expecting better management and oversight—a touch of common sense many would say—and that disappointment (read, shift in expectations leading to anger and disappointment, aka, reputation crisis) is playing out in the courts….Companies and boards need a solid, universally applicable management and oversight process that is forward-looking to manage risk strategically. The quality of that process needs to be proactively authenticated with insurance. Compliance-focused controls, which by design are backward looking—and the audits that authenticate them—are necessary but with the evolving expectations of society, apparently no longer sufficient.

February 12, 2023

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Demonstrating Quality and Effectiveness—not merely effort—is one of the strategic benefits of ESG and reputation insurances.

Demonstrating Quality and Effectiveness. In this recent post by the National Association of Corporate Directors, the lawyer authors write, “Documenting the board’s activities is a critical component of demonstrating management’s efforts to monitor relevant risks and board review of these efforts.” Under the DoJ’s enhanced enforcement guidelines, simply demonstrating effort is not sufficient. Demonstrating effectiveness—not merely effort—is crucial; and it is one of the strategic benefits of ESG and reputation insurances.

January 30, 2023

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Southwest Airlines Reputation Crisis Day 35. Equity returns at 35 days normalized to the S&P500 returns are -6.2% (predicted -5.7%).

Southwest Airlines Reputation Crisis Day 35. Equity returns at 35 days normalized to the S&P500 returns are -6.2% (predicted -5.7%). It is under performing the Dow Jones US Airlines Index (DJUSAR) by 15.4%. The regression technology powering the equity impact model was derived from a study by Steel City Re, an ESG and reputation insurer.

January 28, 2023

Liquidity Issues at Blackstone. "Blackstone has to prevent a catastrophic shift in stakeholder expectations," says Kossovsky.

Liquidity Issues at Blackstone. [There are now] questions about whether the people actually knew the risks, from higher fees than stock and bond funds to the illiquidity of the assets, and even the incentives advisers might get to push certain products. “Blackstone has to prevent a catastrophic shift in stakeholder expectations,” says Kossovsky.

December 22, 2022

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The behavioral economic properties of insurance have long successfully nudged social change.

In San Jose, Calif….on Jan. 1, the city will begin requiring gun owners to carry liability insurance to compensate victims harmed by the negligent or reckless use of a firearm. The behavioral economic properties of insurance have long successfully nudged social change.

December 19, 2022

To follow the quality of risk management, follow the insurance money.

To follow the quality of risk management, follow the insurance money:  Insurers are denying or limiting coverage to clients with exposure to bankrupt crypto exchange FTX, leaving digital currency traders and exchanges uninsured for any losses from hacks, theft or lawsuits, several market participants said. […] The FTX collapse will also likely lead to a rise in insurance rates, especially in the U.S. D&O market, insurers said. The rates are already high because of the perceived risks and lack of historical data on cryptocurrency insurance losses.

December 2, 2022

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Parametric insurance grows in importance. A parametric insurance policy—one that is triggered and insures to model—makes ESG coverage possible.

Parametric insurance grows in importance. In a session at the Cayman Captive Conference 2022 Eddie Brooks, associate director of Alternative Risk Transfer Solutions at WTW, looked at how index-based, or parametric, insurance has emerged over the past two decades as a risk transfer mechanism with particular application to emerging risks resulting from the climate and nature emergencies.  A parametric insurance policy—one that is triggered and insures to model—makes ESG coverage possible. 

October 29, 2022

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Shockingly, Steel City Re’s Illustrated Guide to Reputation Risk Management, a cocktail book, is not on The Economist’s list

Booze you can use. Nearly as much history, culture and science can be found in cocktails as in cuisine. Do not be too put off by the theatre and skill on display in the modern, snazzy cocktail bar: the craft is approachable and can be learned by doing, starting with a few basic skills and guiding principles […] These are the books to banish … ignorance; to think analytically about all the components of cocktails, and thereby to readjust those proportions; to hone the techniques of the efficient (and occasionally theatrical) barkeep; and to get coupette-sized doses of all that history and cocktail culture.

October 18, 2022

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Shifting expectations: bank run. A bank run in our model … is caused by a shift in expectations, which could depend on almost anything.

Shifting expectations: bank run. Douglas Diamond and Philip Dybvig won the Nobel Memorial Prize in economics this year for their work on (bank runs). “A bank run in our model,” they write, “is caused by a shift in expectations, which could depend on almost anything, consistent with the apparently irrational observed behavior of people running on banks.” “Almost anything” could include social media rumors, why not. […] “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” 

October 16, 2022

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Reputation resilience | reputation loss. In politics as in business—authenticating one’s reputation is mission-critical.

Reputation resilience vs. reputation loss. (V)oters have a record of dumping UK governments that lose their reputation for economic competence, even at elections some years later. Truss faces a monumental struggle to convince her own MPs she is capable of rehabilitating her own and her party’s image, and of leading Britain forward. If they conclude she cannot — and some seem already to have made up their minds — they may move against her quickly.

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