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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Assuming Reputation Risk in Your Captive

Reputation Risk
April 08, 2015

Deloitte's "2014 Global Survey on Reputation Risk" (October 2014) found that 88 percent of the executives surveyed say they are focusing on reputation risk as a key strategic business challenge. The survey's Executive Summary states that if the executives who participated in the study are correct, “… a company’s reputation should be managed like a priceless asset and protected as if it’s a matter of life and death, because from a business and career perspective, that's exactly what it is.”

Peter Gerken, senior vice president at Steel City Re LLC, points out to that "quantitative measures of reputational value are now being used for risk quantification, pricing, and support at close to 100 captives that currently insure reputation risk. Additionally, we (Steel City Re) have successfully adapted our public company solution for use with captives owned by private companies."

If done correctly, a strategic risk-mitigation-oriented solution utilizing reputation controls will provide directors and officers (D&O) exculpation and significant enterprise benefits.

A February 12, 2015, CFO article by John J. Kelly and Mr. Gerken, titled “How to Use Captive Insurance to Manage Reputation Risk,” suggests, “If your company discloses reputation risk in its 10K annual report ..., your operational risk controls are mature, and your corporate communications efforts are prudent, then it is probably ready to capture the next level of reputational value: by using your captive insurer to formally fund management of this material enterprise risk."

Mr. Gerken adds: "Utilizing robust reputation metrics enables custom captive approaches that satisfy regulatory and tax authorities. Thus, captive insurers can help CFOs today manage reputation risk while creating enhanced value for the organization."

Mr. Kelly, who is managing partner at Hanover Stone Partners, and Mr. Gerken presented "Innovative Use of Captives to Insure Reputational Risks" at the Captive Insurance Companies Association (CICA) 2015 International Conference recently in Orlando, Florida. CICA members may access the presentation slides.

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