Risk Insider: Martin Eveleigh

Looking Out For Reputational Risk

By: | March 10, 2017 • 2 min read
Martin Eveleigh is Chairman of Atlas Insurance Management, which he formed in 2002. He specializes in designing alternative risk transfer programs – particularly risk pools – and captive structures. He can be reached at [email protected]

Reputational risk has been rising up the list of strategic risks for years. A 2010 study revealed that, at least once during every five-year period studied, 80 percent of companies lose more than 20 percent of their value due to major reputational events. Reputational damage is like any other source of risk, which can affect the corporate bottom line and growth.

Captives Fill a Market Gap

Reputational risk is one category for which the standard insurance market has offered limited products and coverage. It’s not hard to understand why considering reputational damage is difficult to predict and quantify.

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A captive can be a lucrative vehicle for addressing and covering potential damage to corporate reputation and goodwill. It provides flexibility and coverage and can be designed to meet the needs of the owner. By paying for expenses and compensating otherwise irrecoverable losses, a captive liberates owners to make more intelligent responses to events in real time. By facilitating a company’s ability to defend or preserve a reputation, establishing a captive can be seen as the reverse side of building brand awareness in the first place.

 Specific Risks, Specific Coverage

Considered a secondary risk to a larger primary risk, reputational damage can often be more costly than the primary risk. In recognizing and covering the risk of reputational damage within the captive, a captive insurance manager will help the client quantify the risk and the financial impact to the company.

To assist in the formation of a captive, the manager will interview prospective clients to evaluate their business and assess their customers, regulation and public exposure. They can then design an enterprise risk captive to cover actions, exposure and risks that can lead to reputational damage.

Social Media and PR: Living On The Fault Line

Social media acts as an aggregator of information. Even when allegations can be disproven, the damage is costly and time-consuming to repair.

To fully mitigate the reputational risks social media presents, it is important to develop an effective response plan for any situation. The heart of a crisis management strategy is developing an approach to utilize in the first 15 minutes to one hour following an event. If you aren’t prepared and ready with what to say, someone else will respond for you in a way you can’t control. It’s critical to get that first statement right.

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Providing companies with proper coverage, a well-structured captive program, fortified with a strong crisis communications strategy will recognize and address the potential magnitude of loss from responding to and repairing reputational damage.

Reputational damage isn’t just for big targets. Today’s standard insurance market provides few attractive products for addressing this important category of risk. A captive is a smart solution to the problem of defraying the risk of reputational damage. Unlike standard market models, which often target vertical industries, a captive can be designed to meet the specific needs of its owner or parent company and transfer the risk through a structured approach.

More from Risk & Insurance

More from Risk & Insurance

2018 Power Broker

To the Ends of the Earth

From the frozen Arctic to the inferno of a high net worth divorce, Power Brokers go to extremes to find solutions for their clients.
By: | February 20, 2018 • 2 min read

Looking for the Power Broker Winners? Click Here.

Picture this: A bitter divorce so heated that the principals are only communicating through their attorneys. Then their house burns down. Imagine walking into that situation and trying to find solutions that will please both parties.

But that’s exactly what 2018 Power Broker® Jeff Kaplan, family office practice leader, Risk Management Strategies, did.

Kaplan, who won in the Private Client category, negotiated the sale of the property — forget the rebuild, let the new owner take that on, he counseled his clients — orchestrated a 30-day auction for its sale, and achieved a profitable result for every party in the transaction, each half of the feuding couple and the developer of the sold property.

To the client, Kaplan’s work, including his high degree of emotional intelligence, released him from the “seventh circle of hell.”

From that doused inferno, let us now cast our eyes to the frozen north.

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The owner of a barge learned their property sank off of Nome, Alaska, (average temperature 27 degrees Fahrenheit). With an approaching freeze threatening to seal off the harbor, the owners, Phoenix Marine, risked losing valuable equipment.

Into action sprang George Andersen, a 2018 Power Broker® in the Marine category. With precious little time to lose, Andersen negotiated the claim and communicated proactively with the U.S. Coast Guard and other officials. Then he commissioned salvage divers from New York to travel to Alaska and retrieve the valuable equipment from the sunken barge.

Before we depart the Arctic, let us consider another 2018 Power Broker® from Aon, Christian Wise. To arrange cover for a defense contractor’s radio installations in a remote Arctic location, Wise dispatched a loss control engineer, complete with instructions on the use of a shotgun should polar bears interlope in temperatures that registered negative 29 degrees Fahrenheit.

One of the radio installations had already burned to the ground due to scant local fire protection, culminating in a $20 million loss. Despite that, working with London underwriters, Wise and his team were able to shave $1.3 million off an initial property premium cost of $1.8 million.

Power Brokers are judged by a team of Risk & Insurance® editors and writers over a three-month period each year. After interviews with hundreds of sources, winners are picked for their creativity and resourcefulness, their excellent customer service and their industry knowledge.

Not every Power Broker® required one of their associates to tote a shotgun. But many of them went to extremes for their clients; some of them waded into hurricane ravaged neighborhoods to document damage; others put their personal lives on hold, including one Power Broker® who delayed his honeymoon to attend a meeting on behalf of his client.

This year, 158 Power Broker® winners were chosen, as well as 55 finalists, spanning 25 industry categories. Congratulations to every one of these exceptional individuals. Click here to begin reading the profiles of this year’s winners. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]