Specialists in the field of risk management and the insurance market expect reputation insurance business to be dynamic due to the increase in the number and size of reputation threats in the current digital age, said the Insurance Federation of Egypt (IFE) in its weekly bulletin released on 4 February.
There are challenges insurers face in reputation insurance business. The foremost challenge is how reputation is related to the brand and trust of the company affected by a hit on its reputation. In addition, the risks in this class of business involve secondary, behavioural and qualitative risks. “This makes it difficult to identify all risks and include them in the insurance policy, in addition to the difficulty in identifying and assessing potential losses, especially financial losses,” said the IFE.
Furthermore, there is no agreed and consistent measurement of the extent to which business reputation is affected as a result of exposure to specific risks, and there is no framework to bridge the strategic, operational and tactical aspects of reputation risk management, as well as to slowly evolve risk transfer solutions.
The bulletin said that significant reputation damage can be caused by a single catastrophic event or a series of small events that have been poorly managed, minimised or ignored for too long.
The bulletin also addressed the types of risks that could threaten a company’s reputation, which are the direct actions and practices of the company, the actions of employees, leaders, investors, or anyone representing the organisation directly or indirectly, customer dissatisfaction, in addition to the failure to adapt.
Reputation risk insurance was introduced many years ago, but it was historically limited to a fixed compensation mechanism. The concept covers the company’s exposure to a certain level of negative media coverage and has evolved into its current form, whereby the insurance company provides comprehensive coverage that accurately reflects the potentially catastrophic effects of loss or damage to the company’s reputation.
The most common types of insurance against reputation risks are general liability insurance, cyber threat insurance, crisis management insurance and reputation insurance (a separate policy).
The bulletin indicated that establishing a framework for measuring reputation risks agreed upon between the insurance company and the client to measure the risks that reputations may be exposed to is the basis for any insurance policy against reputation risks. M