New Reputational Damage Risk Insurance Launched in Europe

I read with interest that a ground-breaking new insurance product, which covers large corporations against the risk of financial loss caused by a loss of their reputation, has been launched and is now available from Munich Re.

The product, which has been developed by Munich Re’s New Risk Solutions team, the reputational risk insurance, is triggered by a significant drop in turnover following a reputation risk event and is intended to provide liquidity while the company recovers its market share.

Benedikt Schermutzki, Head of the New Risk Solutions unit, in an interview with Commercial Risk Europe stated:

The product is unique because it covers financial loss, or loss in profit. Other existing ‘continuity type’ products usually cover marketing expenses. Such products don’t compete with ours but they are complementary,”

There are many recent examples of corporations that have suffered big financial losses when their reputation took a nose dive after an event. For example, the cruise ship operator, Carnival, reported a significant reduction in bookings after the Carnival Paradise ran aground off the coast of Italy at the beginning of 2012.

Insuring the balance sheet of a company is clearly what larger corporations are looking for. It will be interesting to see how long it will take for the coverage to be available in our part of the world.

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