Captive insurers are “key” to the reputational risk financing effort, according to Nir Kossovsky, CEO of Steel City Re, a reputation risk management company offering robust solutions for both a company and its board.
Reputation risk can be defined as the peril posed by a company’s potential failure to meet stakeholders' expectations of a company’s real-world performance, an expression of what stakeholders value in a company’s quality, ethics, safety, security, innovation, and sustainability.
Kossovsky emphasised that reputational risk is misunderstood by many companies but some are now discovering that reputation is more an issue for the risk side of the house than for the marketing side.
He believes that the area represents a massive opportunity to captives and that they have a vital role to play, particularly in the digital age where the world of reputation risk has enlarged.
Social media has expanded the range of potential stakeholders who may become disappointed and exercise their economic power in anger.
Kossovsky noted: “Even regulators—human beings with emotions— have the freedom to apply the law or give the company a break, so the intensity of emotion is an important driver of reputational damage, and why crisis communications professionals believe apologies are so important.”
In this sense, captives are a great help due to their increased capital reserves capacity and better preemptive storytelling as part of a reputation risk management strategy, Kossovsky notes.
He explained: “The roles that captives play is, in part, setting the expectations of the capital markets by providing reserves to cover the shortfall in the event that something bad happens. It’s a very important signal to be sending out”.
Look out for the full interview with Kossovsky in the next issue of Captive Insurance Times.
