Most reputation risk policies don't offer reimbursement for revenue losses

Even as companies have become more sophisticated in quantifying their financial losses resulting from an injury to their reputation, most insurers have not extended their reputation protection coverages to include lost revenue or profits.

Aon P.L.C. and Oxford Metrica's 2012 study of 10 global companies' financial results following reputational disasters in the prior fiscal year found that nine out of 10 shed a combined $77.9 billion in shareholder value (see chart, page 33).

Still, among the seven reputation risk insurance policies available from major insurers, only two offer coverage for reimbursement of direct top- or bottom-line losses.

German reinsurer Munich Reinsurance Co.'s stand-alone policy offers up to $65 million in indemnification for lost profits, based on the actual drop in profits and the results of a consumer survey that will determine what percentage share of that drop is attributable to the covered reputation risk event.

The coverage can be triggered by an occurrence of a named risk event or by a significant increase in negative media coverage of the organization, depending on the option purchased. The policy also would be triggered by a significant drop in revenue under both coverage options.

The specific risk events covered under the policy, and the length of time used to measure the drop in profits after a covered event, are negotiable.