Kidnap and Ransom Insurance; Facing the Risks of Globalization and Expansion

With the news that Carlos Tevez’s father has just been released by his abductors, the subject of Kidnapping (and the following ransom) is trending across leading social networks.

Although it is not a common topic of discussion, the high degree of economic expansion of many corporations and countries in the early years of the 21st century has been accompanied with an increase in crime levels in a number of levels – particularly with regards to cases of kidnapping. In fact, according to current statistics, two kidnappings will occur every hour somewhere around the world.

Despite the recent popularity of Kidnap and Ransom (K&R) topics, due to current events, and despite the background of increased global crime in key developing markets, the subject is not often looked at. Although a number of major corporations in risky markets will have obtained K&R insurance coverage on their employees, the protection is not as well understood as (for example) a health insurance policy, and many staff will not even be aware that such coverage is in force!

Kidnap Risks are Global

From the Philippines, Thailand, Indonesia, India, and China, through to a majority of African and Latin American nations (including Nigeria, Mexico, Argentina, Brazil) and even some parts of the Russian Federation, the extreme potential for business growth can be found in a number of relatively unstable locations throughout the planet.

With German tourists being kidnapped in the Philippines, children of businessmen being kidnapped in Cambodia, and oil workers being kidnapped in Malta, it is clear to see that kidnapping is a global issue which can occur, without warning, anywhere on earth. Certain countries may be more disposed to incidents of kidnapping, but no matter where an individual is on the planet, and no matter whether they are overseas on business or for pleasure, there is a certain amount of risk.

This risk is further compounded in the modern age with the emergence of social networks – including those, like twitter, which are currently abuzz with the topic of Segundo Tevez’s abduction – and with the ability of abductors to use social technology to stalk victims and choose the most appropriate abduction tactics. Threats against individuals, and companies, are increasing on a daily basis. As such, companies are starting to re-asses the levels of protection which they provide to employees on a worldwide basis – and to ensure that staff, workers, and the corporation itself is protected against instances of kidnapping, ransom, or extortion.

With the biggest business opportunities in the 21stcentury often found in some of the riskiest locations, organizations – and workers – have to balance the potential for profit against the danger employees will face on a day-to-day basis.

Mitigating the Risks of Kidnap, Ransom, and Extortion Threats

The three main risk areas facing companies in developing are:

• Threat of criminal harm to employees unless payment is made
• Threat of criminal harm to physical products and/or provisions unless a payment is made
• Threat of electronic criminal harm unless a payment is made

Until recently, a majority of the Kidnap and Ransom insurance products available on the international market were designed, simply, to provide coverage against only instances of actual kidnapping and ransom. However, to reflect the growing ability of criminals and criminal organizations to conduct extortion operations on myriad fronts (from the digital through to the physical) the nature of a K&R insurance product has evolved over time.

Today, a Kidnap and Ransom insurance policy, both in Hong Kong and throughout the rest of the world, will provide protection against a wide range of extortion and kidnapping related risks. From cyber-extortion (a growing area of crime globally) through to physical extortion of a company’s property, products, employees and families, a Kidnap and Ransom insurance policy can be extremely valuable in providing a comprehensive safety net to businesses operating in some of the most dangerous parts of the world.

The Oil Field Example

An area where it is extremely easy to see the benefits of a comprehensive modern Kidnap and Ransom insurance plan is within the Oil and Gas industry.

Frequently operating in some of the riskiest countries on the planet – including Nigeria, the entire Middle East, and relatively unsafe areas of eastern Europe – and as some of the most profitable companies in the world, Oil and Gas workers are frequently exposed to the very real possibility of actual harm in the form of a kidnap or extortion attempt.

An Oil worker kidnapped off of a remote rig, or abducted while on his way to report for an assignment, can be, potentially, an extremely lucrative job for a canny criminal operation – realistically fetching tens of thousands of US dollars in ransom, at a very minimum.

Outside of the simple kidnap attempt, a criminal operation could extort, or blackmail, the Oil and Gas industry worker to pollute the product being produced by the Oil company – thereby impacting many hundreds, if not thousands, of organizations and individuals across the world. A contaminant introduced into barrels of refined petrol would ruin vehicle engines and cause extreme losses for whomever used the final product.

In an interconnected and globalized world, a simple act at an oil field or refinery can have drastic and severe outcomes throughout the rest of the planet.

Kidnap and Ransom Insurance Challenges

While the case can, and should, be made for Kidnap and Ransom insurance to be considered by companies in every country throughout the world (especially for those operating in high risk locations) there have been, historically, a number of obstacles to the implementation of a Kidnap and Ransom plan.

The biggest challenge facing Kidnap and Ransom insurance coverage is the simple fact that, under a majority of policies, company employees cannot know that such coverage exists, and if a company employee is aware of the policy then the coverage may be voided.

This is due to the fact that there is a high risk of fraud in relation to K&R products – if a valuable, but unscrupulous employee who is operating in a dangerous part of the world is aware of the existence of a K&R insurance plan provided by their employer, the employee may have some incentive to work with a local criminal organization to stage their own “kidnapping” in return for a portion of the ransom payment which is being provided by the insurance company.

Furthermore, in many legitimate cases of kidnapping and abduction of corporate workers in high-risk locations, one of the core demands of abductors is that the entity being extorted for a ransom payment may not contact any legal authorities (or anyone else) about the abduction! If an abductee’s family cannot contact the police, then the likelihood of their contacting their employer, or even the insurance company, is vastly reduced. Ignoring the issue of whether the K&R policy’s existence is known by the employee, simply contacting the abductee’s employer carries a high degree of risk that, in a legitimate kidnapping, the abductee will suffer actual physical harm (or death) due to the actions of the individual being extorted.

Global Kidnap and Ransom Insurance in the 21st Century

Despite the fact that there are challenges with the design and implementation of a Kidnap and Ransom insurance plan, these policies are the best way for companies and individuals working, or living in a high-risk high crime area to protect themselves against instances of extortion – and ensure that a quick resolution is found when extortion or kidnapping occurs.

K&R insurance products have developed to a great extent since the early 1990’s and the plans available via the leading K&R insurance providers have a high level of sophistication over the first generation of product offerings. Often including the support of leading security support organizations and kidnapping negotiators, more is offered under a K&R insurance plan than simple ransom payments.