A new London market consortium will offer insurance and crisis management solutions to mitigate reputational risk, with Beazley at the head of the slip

Three Lloyd’s insurers have committed to a new London market consortium focused on insuring reputational risk.

lloyd's CFO

The Custodian Consortium will offer substantial limits with additional capacity initially provided by Tokio Marine Kiln and RenaissanceRe as well as Beazley’s smart tracker Lloyd’s Syndicate 5623.

Led by Beazley, the collaboration will offer “a unique and flexible solution to an issue that has long preoccupied the C-suite”.

Cover is aimed at US-domiciled organisations with up to $5bn in revenue, including both public and private companies, and for-profit and not-for-profit enterprises.

With underwriters’ consent, an event that threatens major reputational damage could entitle the client to crisis management advice worth up to $1m.

The first $250,000 of this cover is available on a pre-loss basis, regardless of whether a loss of revenue is ultimately recorded.

Business interruption cover is triggered by a revenue drop that pre-agreed at policy inception. Because organisations can rarely predict what might trigger a reputational crisis, the policy works on all-risks basis.

Exclusions include cyber and product recall, systemic events or macro-economic impacts, failure of corporate strategy, fraud or criminal acts.

Beazley suggested some potential scenarios for crises, including allegations of sexual harassment or bullying against a senior executive, or the mismanagement of such claims, to faulty or misused medical equipment.

A reputational crisis can affect an organisation in many ways, hitting revenue, the ability to hire and retain talent, and the support of stakeholders, Beazley noted.

In the event of a crisis, clients will be supported by crisis management advisory firms, APCO Worldwide and CrisisRisk.

Tokio Marine Kiln has fielded a reputational harm product since 2011, providing a $25m indemnity for lost profit attributable to an adverse media event.

Rachel Turk, focus group leader of Beazley’s London-based directors’ and officers’ liability (D&O) team, said: “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. Our policy has been designed to ensure that crisis response expertise is available, backed by the necessary funds, as soon as an incident occurs,” said Turk.

“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,” the D&O specialist added.