For too long there has been a mismatch between the cover that risk managers demand and the policies that insurers are willing to provide.

But that gap between demand and supply seemed to get a little narrower today (29 April) with news that a group of Lloyd’s insurers is starting to write cover for reputational risk. 

One of those insurers, Beazley, warns that a reputational crisis can affect an organisation in many ways, from hitting revenues to hindering its ability to hire and retain talent, as well as jeopardising stakeholder support.

“In an era in which social media amplifies every crisis, the rapid dissemination of information – true or false – demands an urgent and co-ordinated response,” Beazley says.

“Having the right approach in the early stages of a crisis can often forestall further damage.”

In response, Beazley has partnered with fellow Lloyd’s syndicates Tokio Marine Kiln and RenaissanceRe to create what it calls the “Custodian Consortium”.

The policy provides crisis management support to reduce reputational damage following an incident, as well as “substantial” loss of profits cover to protect companies after a significant downturn in revenue.

The policy provides up to $1mn worth of crisis management advice, with the first $250,000 of that available on a pre-loss basis, regardless of whether the firm suffers a drop in revenue.

It also includes business interruption cover, which is triggered by a pre-agreed drop in revenue.

“Because organisations can rarely predict what might trigger a reputational crisis, the policy works on all-risks basis,” Beazley said.

“It therefore covers many potential scenarios that could affect different sectors, from allegations of sexual harassment or bullying against a senior executive, or the mismanagement of such claims, to faulty or misused medical equipment.”

However, the policy excludes cyber and product recall, systemic events or macro-economic impacts, failure of corporate strategy, fraud or criminal acts.

The insurers are targeting US-domiciled organisations with up to $5bn in revenues.

“In an era in which news travels faster through social media, risk to hard-earned reputations is greater than ever before. Preparedness and speed of response are critical,” said Rachel Turk who leads Beazley’s London-based team writing cover for directors and officers.

“Our policy has been designed to ensure that crisis response expertise is available, backed by the necessary funds, as soon as an incident occurs,” she says.

“By pre-agreeing the level of revenue drop that will trigger a claim at the outset with our underwriters, clients can be sure that no time will be lost in providing cover that meets their requirements, and generally without the need for loss adjustment.”