Anthony Hilton: Insurers find it hard to keep up with firms’ capital

Someone in Lloyd’s of London told me big companies today could often buy insurance for only half the risks they faced.

The reason, he said, was that what makes a business valuable has changed, and insurance companies have found it difficult to keep up. Twenty years ago the value in a business related mainly to its tangible assets. These were straightforward to insure.

Today the value is often in the strength of supplier and customer relationships, the R&D pipeline, the quality of its brands, the knowledge of its employees, its reputation or the way it applies technology.

These are so hard to quantify that they are very difficult if not impossible to insure; we see time and again that damage to reputation – a horsemeat scandal for example – has a huge impact on a business.

There is a growing understanding that companies today have all sorts of capital. This lay behind an event at Tate Modern on Wednesday when Tomorrow’s Company, a think tank, and Mazars, one of Europe’s largest accounting firms, launched a Charter for Business. This emphasises the need for companies to define their purpose – what they are there for – in ways which meet the expectations of all stakeholders, not just their investors.

Such understanding will make businesses better equipped to withstand shocks from some of these uninsured risks. If they do not, it is hard to see how they will be able to survive and prosper.