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09.08.2015

Increasing Kidnap For Ransom Events Demand Precautionary Coverage

Marc McLean - Head of Personal Accident Division

Kidnap events have increased in frequency due to heightened turmoil in areas around the world. Emerging areas of personal risk exposure are regions, such as Africa, Asia and Latin America, where greater disparities of wealth breed criminal activity. Corporate executives, their families and high net worth individuals are typically the criminals’ target, driven by calculated attempts to reap the largest financial reward.

Kidnap for ransom is a sinister endeavor with a high return on investment for the criminals who perpetrate such crimes. While the actual number of kidnapping occurrences is impossible to quantify, as most are unreported events, industry estimates the number could surpass 30,000 with ransom demands exceeding $1 billion per year globally. The professional lines’ kidnap and ransom insurance market, therefore, is experiencing growth as a direct result of clients becoming better educated about such risks and the existence of responsive coverage to protect them.

Politically Motivated Hostage Scenarios Continue to Intensify

High profile, politically-motivated hostage scenarios have intensified, particularly in countries that house Islamic Fundamentalists. Victimized families of U.S. citizens have expressed frustration with perceived government inaction and ineffective intervention on behalf of their loved ones. While many European governments reportedly regularly pay ransoms for citizen release, the U.S. government has a long standing policy of prohibiting concessions to militants. In July, however, the White House announced changes to government handling of hostage situations involving U.S. citizens. President Obama issued a policy directive that removed the legal threat of prosecution to families that attempt to pay captors’ ransom, though without enacting a change in law. While such legal action has never been taken, the directive eliminates the existing barrier that threatened the individual’s payment source, for private individuals at least.

Risk Analysis & Education: The Keys to Precautionary Coverage

More companies with international operations are being sensitized to personal risk exposure facing their employees and customers, especially those working in high risk regions. Indeed, the organizations that purchase kidnap and ransom insurance believe they have a moral obligation to provide protection to these stakeholders as such coverage can provide protection to individuals against kidnap and ransom, extortion, hijacking and wrongful detention. Furthermore, since the kidnap and ransom insurance market was established at Lloyd’s in the late 1970’s, policy coverage has become necessarily more sophisticated and specialized in response to an increasingly interconnected, complex world of personal risk. Part of this increased sophistication has included incorporating professional consulting services associated with pre-crisis training; yet many insureds are not taking advantage of these benefits. Precautionary action can include professional consultative services from crisis experts that offer personal safety guidance, security protection and procedural guidelines for event resolution.

Corporate insureds and high net worth individuals can and should leverage the coverage availability of professional services imbedded in many of today’s insurance programs that encompass pre-event risk prevention features. Broader education is still required to help management understand risk exposure and the importance of accessing response companies with expertise in managing kidnap for ransom incidents, which cannot be underestimated.