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Lockton Introduces Intangible Risks Insurance Program
[July 23, 2013]

Lockton Introduces Intangible Risks Insurance Program

Jul 23, 2013 (Close-Up Media via COMTEX) -- Global companies face a challenging array of risks from reputation and computer system interruption to disruptions of supply chains or outsourced functions, according to a release.

These previously "uninsurable risks" can now be insured through a new customized program developed by insurance broker Lockton and Lloyd's insurer Kiln. The Company said it is called the Lockton Intangible Risk Policy.

"These big boardroom risks previously fell outside of traditional insurance because the cause of loss was not a physical event or did not result in physical injury or damage to tangible property," said Emily Freeman of Lockton's Privacy and Global Technology Practice in London. "Rather than focusing on physical buildings or inventory, the Lockton Intangible Risk Policy recognizes the real value of reputation, computer networks, and intellectual property as a driver of revenue production and investment value." Lockton reported that it has created this insurance program with a Lloyd's insurer Kiln, to create a multi-peril insurance policy that can be adapted to meet specific client needs. It addresses key areas of risk that were completely uninsured or only inadequately addressed by traditional insurance. The policy is focused on first-party loss of net income and extra expenses. Insurance capacity to at least $50 million is available through the primary lead underwriter and excess markets.

The Company noted that the key perils in the program include: -Reputational Harm: The cause of loss is adverse traditional or social media coverage that drives down revenue or sales. It can be sparked by data breaches, breach of fair labor laws and environmental damage, key person disgrace, loss of certification/accreditation, product safety or quality failure, or other perils agreed with the underwriter.

-Inability to sell products, which depend upon Intellectual Property. This peril addresses the income and expense consequences of losing an intellectual property dispute, including the costs of work-arounds and licensing fees.

-Computer Network Failure: Causes of loss include computer attacks, operational or administrative errors, accidental damage to hardware or digital electronic assets, political risks, and terrorism. What is critical about this coverage is that the limits apply not to internally run systems but includes contingent business interruption and extra expense from outsourcing or cloud services.

-Outsourcing Disruption or Supply Chain Interruption: This coverage is highly tailored to individual clients but can include seizure or nationalization by governments and political risks to supply chains.

Lockton and Kiln walk clients through a customized underwriting process to determine the risks and claims settlement processes in advance. Lockton said it has already developed customized policies for several global companies under the program.

"Businesses operating today know that their profits are heavily dependent on intangible factors such as brand, intellectual property, computer networks and supply chains. This new coverage is a direct response to intense demand from risk managers for insurance innovation in these areas," says Tom Hoad, an Underwriter in the Enterprise Risk division at Kiln.

"As a forward thinking and innovative insurer, we welcome this approach by Lockton in helping clients to transfer these modern day risks," says Paul Culham, Active Underwriter of the Enterprise Risk division at Kiln.

Lockton provide clients with risk management, insurance, and employee benefits consulting services.

Kiln is an international insurance and reinsurance underwriting group with a portfolio of specialist risks.

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