11 November 2013Analysis

Reputation now a viable line for some smaller captive owners

Generally considered the realm of multinational corporations, some smaller companies are also suited to take advantage of the captive option for reputation risk according to Eric Fauerbach, CEO of Alterra Risk Management.

Fauerbach explained: “the best use is made by larger corporations who have more broad reputational exposure, but there certainly are pockets within the small and mid-size arenas that make sense. This is particularly true in areas where the reputation is built on one specific product line with a strong brand image in the middle market.”

He elaborated: “it’s something that all captives could look at but I think it fits more with companies that have product liability exposures. Also, as companies get more involved in the channels of social media it expands their reputational risk exposure.”

The concept is picking up steam in an increasingly interconnected world. Fauerbach concluded: “Captive managers are looking to drive insuring reputation risk through a captive forward as a concept because there is an awareness issue. Now, as captive managers are starting to explore the opportunities to a greater degree, they’re starting to bring the concept to captive owners. Several owners may have brought up the possibility in the past and it just wasn’t a feasible option then—but now it is.”