Two-thirds of executives believe their companies are underinsured for reputational risks, according to a report by Ace Insurance.

The insurance industry should help businesses understand, prepare for and prevent incidents that could cause long-term damage to their images, this year’s European Risk Briefing says.

The survey of 650 risk managers in Europe, the Middle East and Africa also highlights calls for new insurance products to mitigate exposure to reputational damage. 

“Companies want assurance that, should the worst happen, they have the advice, back-up and financial support to get through the crisis and start rebuilding their reputation,” the report says.

Ace calls for “more holistic insurance solutions that involve the input of crisis and PR specialists”, plus cover for financial loss associated with damaged reputation.

“We believe there is much that insurers and brokers can do collectively to help their clients.”

The report recommends helping clients better manage “traditional risks”, thus reducing the possibility of reputational damage.

It concedes quantifying long-term reputational risk is challenging, which makes setting parameters for insurance coverage difficult.

About 80% of executives surveyed regard reputation as their company’s most significant asset, but 90% say it is the most difficult risk category to manage.

Executives’ biggest concerns about reputational damage are harm to customer relationships and financial impact.

Poor employment conditions and corruption in foreign subsidiaries are considered the main potential threats. 

Ace says better preparation and regular testing of crisis responses are vital to reputational risk management, particularly in the age of social media.

Companies have just “hours and minutes” to respond to crises and may underestimate the challenge of handling an event in “faster-than-real time”.

Regulation and globalisation are driving the changing reputational risk environment, the report says.