Less than 10% of major reputation crises insurable: Willis

About 95% of major corporations have suffered at least one major reputation crisis in the last 20 years, but less than 10% of these events are insurable, according to Willis Group Holdings.

Phil Ellis, CEO of Willis Global Solutions Consulting Group, spoke at the Risk Frontiers conference in London, U.K. recently. He researched the performance of 600 publicly held companies, finding that major firms suffer a significant reversal of fortune once every seven years.

Furthermore, 19 out of 20 companies suffered at least one such reversal over the 20-year time span of the research.

“About 50% of the events we researched had to do with problems with the company’s business strategy or model,” he said. “Fifteen per cent were from lawsuits, 10% were due to M&A problems. Notably, until 2011, natural catastrophes were not a factor in these reputation crises.”

Given that the insurance industry primarily offers protection against named perils, less than 10% of major reputation-damaging events are due to an insurable, peril-related event, Ellis said. He continued that clients want to see reputation cover added with no or few exclusions, high limits and priced below the cost of capital.

“Insurers have so far not shown any real interest in responding to these needs, and so we’re looking increasingly towards capital markets for answers.”