Got a Crisis? Tap AIG (Really)
After taking heaps of blame for the financial crisis and accepting a $130 billion government bailout to survive, American International Group Inc. (AIG - News) knows a thing or two about bad publicity. Now it wants to help others weather such storms—for a price.
Chartis, the property-casualty subsidiary of the New York insurer, is offering a new type of coverage to help companies offset the cost of bringing in outside experts when a public-relations crisis hits. Dubbed ReputationGuard, the insurance will pay for policyholders to seek the counsel of two crisis-communications firms, Burson-Marsteller and Porter Novelli, even before a possible crisis becomes public.
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Companies often turn to such crisis-communications firms when they need help shaping responses to events that could cause lasting damage to their brands or their businesses, such as food contaminations, environmental disasters, executive scandals—or government bailouts.
Chartis's new product comes with some precedent. Some types of product-recall and data-breach insurance, for example, provide coverage for consulting with public-relations companies. Broker Willis Group Holdings PLC (WSH - News) offers it as part of a bedbug-infestation product it launched earlier this year. Chubb Corp. even provides money for public-relations expenses for wealthy homeowners if they are sued by their household help in a high-profile case.
The Chartis policy, however, doesn't specify a particular event that would trigger the coverage. Instead, it is designed to cover a broad range of potential public-relations problems, said Rob Yellen, chief underwriting officer of Chartis's executive-liability practice—"the sorts of things that a stakeholder would look at as a breach of trust."
The coverage was devised after discussions with insurance clients and brokers indicated a potential market for the product, Mr. Yellen said. Burson-Marsteller and Porter Novelli were selected because of their expertise in crisis communications and their global reach, he said. Under the arrangement with AIG, the firms will provide their services at rates they charge preferred customers.
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Though the insurer's announcement of the new coverage doesn't say it, AIG was a Burson-Marsteller client after getting a large U.S. bailout in 2008. The billions AIG took from the government prompted criticism from the halls of Congress to the faux-newscast on "Saturday Night Live," and Burson-Marsteller was brought on to help AIG weather the storm.
Chartis, in fact, wasn't called Chartis until it rebranded itself in 2009 to distance itself from its parent company. The name was changed from AIU Holdings as part of the company's crisis-management strategy.
Chartis isn't the unit that prompted AIG to seek the government's help, and much of the bailout has since been repaid. The U.S. Treasury still owns the majority of AIG's common stock, which remains down more than 95% from its precrisis peak.
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As for the ReputationGuard product, the cost will vary widely based in part on the size of the company seeking the coverage, the soundness of its crisis-response plan and its potential need for the crisis-management services, said Tracie Grella, president of Chartis's Professional Liability unit. Small companies with a crisis-communication-preparedness plan could see premiums of about $10,000 annually.
Christopher Lang, a managing director at insurance broker Marsh Inc., said the coverage would likely be most attractive to small and midsize firms, in part because they may not have sufficient crisis-communications expertise in-house. Larger firms may also be more able to absorb the cost of consulting with such outside experts without tapping the insurance markets.
"There certainly is broad-based concern about having a crisis-management strategy," he said. "There should be a marketplace" for the new product, though it won't have universal appeal, he said.
AIG can't buy insurance from itself, of course. But when asked Tuesday if the product would have appealed to company ahead of its P.R. troubles in 2008, an AIG representative declined to comment.
Write to Erik Holm at erik.holm@dowjones.com
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