Airmic members and Lloyd’s working on reputational risk solutions

Airmic members are working with Lloyd’s to try and develop products and services for reputational risk, aided by recent developments in data sciences and insurance market innovation. Matthew McEwan, director of risk management at Coca Cola, told CRE that a number of UK risk managers and Airmic members, including himself, are taking part in a Lloyd’s product innovation initiative. “The innovation hub at Lloyd’s is looking at the next opportunities for product delivery and how the insurance market can remain relevant to customers in a world where intangible assets are becoming more important,” said Mr McEwan. “With developments in data sciences, opportunities are opening up to develop reputational risk products and services. But there remain issues around pricing and sustainability. In today’s economic environment, how do you sell such a product? We need to develop propositions that are relevant and that add value to insurance buyers. But they also need to be a sustainable product for the insurance market,” he said. Mr McEwan is taking part in a reputational risk management session at Airmic Fest tomorrow, alongside Lloyd’s and RepTrack, which provides reputational risk management solutions. Developments in the insurance market and data sciences are making the prospect of reputational risk transfer products and service more likely, according to Mr McEwan. Big data and data science are producing more information, while third parties have developed models to measure and benchmark reputational risk. RepTrak, for example, uses data science and machine learning to measure and analyse consumer opinion for corporations, including Coca Cola. Insurance market innovation also hints at potential solutions for reputational risk. The cyber insurance market, for example, has developed support services and upfront risk management solutions in addition to transfer products. This model could be applied to reputational risks, said Mr McEwan. Parametric insurance products may also offer solutions, and the market has been looking at whether parametric triggers could be applied to reputational risk. “There is growing interest in how reputational risk indices can be aligned with risk management and drive potential products, including insurance. This is creating new thinking and research and development around the theme of intangible assets and reputational impact,” said Mr McEwan. With reputational risk assessments supported by data and analytics, companies can begin to “demystify” how events can impact reputation, he explained. “If you can plan ahead and develop a crisis response, it is possible to manage the impact of a crisis on reputation, which opens the door to risk transfer,” he added. According to Mr McEwan, there is growing focus on events that have an impact on intangible assets. During the past 50 years, companies have experienced a big shift away from physical to intangible assets, which are now thought to account for 80% of companies’ value, compared with just 20% 50 years ago. At the same time, globalisation and technology have made risks more interconnected and complex. Covid-19 tested companies’ reputational risk management, along with crisis response, ERM and risk financing, according to Mr McEwan. Other potentially large reputational risk events are on the horizon, not least climate change, he warned.

Airmic members and Lloyd’s working on reputational risk solutions

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