David Rohde, a New York Times reporter in Afghanistan, 2009.
Elizabeth Smart, a 14-year-old girl in Salt Lake City, 2002.
In March 2011, twenty-two Canadian oil workers were held as hostage in Bogotá, Columbia by local rebels.
New York Times journalists Lynsey Addario, Anthony Shadid, Stephen Farrell, and Tyler Hicks, Libya, March 2011.
These are the names we associate with contemporary kidnapping cases: Journalists taken while reporting in war zones; foreign employees captured by guerilla rebels; innocent children snatched through bedroom windows with no apparent cause.
According to Victor O. Shinnerer & Company, underwriting managers of specialty insurance lines, kidnapping rates across the globe increased more than 275 percent in the last 10 years. Because kidnapping for large ransoms has become so profitable, insurance companies have responded by offering Kidnap and Ransom (K&R) insurance.
Yan Bui, account executive at Clements International Insurance, says this type of insurance is relatively unique. Bui became interested in learning about K&R as more people began asking questions about traveling to risky areas of the world like Somalia.
“There are portions of the policy that could be covered elsewhere, but the true heart of [K&R insurance] is really only going to be found in this policy,” Bui says. “You may be able to find similarities under a foreign package policy [which can include combined foreign general liability, auto, workers compensation, property, etc.] but it could be limited and not have as rich of benefits or cover travel to high-risk locations.”
According to Bui, organizations that send their employees to high- or even low-risk places to work should have this policy, especially because premiums can be as low as $1,000 to $2,000 per year. However, premiums are driven by the number of people traveling, where they’re going, and the reason for travel.
Other candidates for K&R insurance are high-profile people or those with a high net worth. Celebrities and politicians may also have this type of policy, as well as companies that regularly send employees to work abroad.
Where do most kidnappings occur?
Latin America: 48 percent
Asia & Pacific: 25 percent
Africa & the Middle East: 16 percent
North America & the Caribbean: 8 percent
Europe and the Former Soviet Union: 3 percent
Source: Victor O. Schinnerer & Company, Inc.
Companies take out coverage that generally ranges in the millions. For example, Shinnerer offers up to $65 million, IronPro offers up to $5 million, and Chartis up to $50 million. The higher amounts would be for companies (where multiple people could be kidnapped at once with higher ransoms) and high profile people such as politicians or celebrities. The Average Joe would not typically need as much coverage as those high status individuals.
“Once the policy is sound, the broker or agent will send the emergency procedures to the insured, and each insurer has their own response team,” Bui explains. In case there is a kidnapping, the notification should always be to the response company and not the insurance company, which will then alert the crisis management team to deploy consultants to work with the client and provide advice in the background or work on the frontlines by negotiating.
“The [consultant’s] involvement depends on how strong the local authorities are and how cooperative they are. Consultants may choose to go in a different direction, but it depends on each individual situation,” Bui says. “Some have the capabilities to do the ransom delivery; if they don’t, they will contract it out [to a consultant who does].”
“Local nationals are typically kidnapped at a higher rate,” Bui says, attributing this to expatriates living abroad relying on a certain routine and becoming less aware of their surroundings over time. “People going into villages doing humanitarian work in high-risk areas are also in danger.”
K&R policies offer unlimited consulting expenses in the case a kidnapping occurs, which is paramount considering consultants can easily charge $2,500 per day, according to Bui.
“If you’re an independent contractor, whether or not you have coverage would depend on the organization,” Bui says. “Some employers do include their independent contractors, but you would have to check and possibly buy the policy for yourself.”
The good news, said Bui, is that most kidnap victims survive, though some may die during risky rescue operations or because of health issues. According to Control Risks, a crisis consulting company, just 6 percent of all the known kidnaps in 2009 died or were killed. The majority of the kidnap victims were released, while 25 percent were rescued and 3 percent escaped their kidnapper.
But before insurance fraudsters decide to take out a policy and fake a kidnapping, be warned: K&R insurance policies pay out on a reimbursement basis.
“You can’t just say ‘I’ve been kidnapped,’ and get a million dollars. Policyholders are still responsible for securing funds and going to the bank and securing the loans to get the money, which cuts down on potential fraud,” Bui says. “But the ransom would probably not be an insane amount, because it’s the job of the contracted negotiator to work the amount down. The kidnappers often go down to an amount they can actually get.”
In theory, the claim money could be returned to the company or family that paid the ransom if the kidnapper is caught and apprehended; however, Bui said this is extremely rare.
Although Clements International will write K&R policies for high-risk travel areas, there are a few places they can’t cover.
“I had a broker ask me if we could write insurance for a college student going on a holiday to North Korea, and we could not,” Bui says, adding that other off-limits places are Iran and Cuba.
Coverage options for a standard Kidnap and Ransom insurance policy
-Hijacking
-Extortion
-Wrongful detention
-Death or dismemberment
-Legal liability
-Temporary workers and employee salaries
-Rest and rehabilitation
-Travel expenses
-Medical expenses
-Fees and expenses of independent contractors
– Public relations consultants
Source: Victor O. Schinnerer & Company, Inc. and Clements International
