K&R expert tells StrategicRISK which of our region’s citizens, territories and industries are most at risk

Chinese nationals and employees in the resources industry are most at risk of kidnapping, according to assistant director of credit, political and security risks at JLT Ashley Coles.

“The most highly kidnapped nationality on earth is the Chinese,” explains Coles.

“The Chinese tend to go overseas to start projects in very large numbers and they often go to high risk territories, such as Iraq, Africa, and they are investing heavily in Pakistan, which is considered to be a very high-risk territory for kidnapping.”

Coles says there were several high-profile cases last year of Chinese companies suffering employee abductions, including one in Nigeria in which five Chinese employees were taken across the border into Cameroon.

“In Asia there are four key territories where we see interest in the [K&R insurance] product,” Coles explains.

“The first one is the Philippines because they have got serious underlying domestic threats, especially in the southern islands.

“Then there is eastern Malaysia, where a couple of attacks happened last year, then Indonesia and mainland China – we have been directly involved in a few cases in China.”

Coles said the most highly targeted industries are oil, gas and mining.

“That is because of what they do and where they go,” he explains.

“Any industry which is involved in taking precious minerals or resources out of a territory overseas is likely to attract unwanted attention. They are also perceived to be high-value targets.”

Coles said it is overwhelmingly local nationals who are victims of kidnap events.

“There is this perception that foreign nationals are more at risk overseas that local nationals, but that is not the case because foreign nationals overseas are generally much better protected than most on-the-ground, day-to-day workers, who are, for example, going on public transport on a regular basis,” he says.

A ‘more holistic crisis management tool’

Coles explains that when mitigating kidnap risks with insurance, K&R polices extent well beyond their namesake coverage.

“K&R policies will cover any form of kidnapping for ransom, which might be one of three types: a criminally motivated kidnapping, a politically motivated kidnapping, or an opportunistic kidnapping,” he says.

“However, I prefer the term ‘Special Risks’ insurance to K&R insurance. The product has been in existence for over 30 years and in its infancy it was just a kidnap and ransom policy, but today it is a more holistic crisis management tool, which as standard will cover six or seven main perils in addition to kidnapping.”

Coles says those other perils include extortion or threat, wrongful or illegal detention, emergency political repatriation for security reasons, hijacking of an airliner, plus hijacking for ransom, which was a major issue during the 2008 and 2009 maritime piracy epidemic.

“It will also cover a hostage crisis scenario, which is something we are seeing more of in the new age of Islamic fundamentalism,” he says.

“You only need to look at the impact on [French magazine] Charlie Hebdo in Paris, or at Lindt [café] in Sydney, and most recently at the [Bardo National] Museum in Tunisia.

“Another event covered is ‘disappearance’. That is where there is no kidnapping, no communication with kidnappers, someone just goes missing. So your employee is due for a meeting on Tuesday and by Wednesday you still have not heard from them.”

Understanding the cover

Many companies do not fully understand the broad nature of K&R cover, according to Coles.

“There are two strands to K&R, or Special Risks, cover,” he explains.

“The first is the financial protection the policy provides and that includes aspects such as the reimbursement of ransom payments and additional costs associated with such a crisis, which can end up being astronomical.

“It also covers legal liability, which protects clients against a law suit by an employee after such a crisis.”

Coles says the second strand is the emergency crisis response from trained kidnap advisers who fly to the location of the incident, or the headquarters of the company, and assist in setting up a crisis management team and leading negotiations with the kidnapping gang.

“This crisis response consultant, who is trained in such matters, becomes the personal and trusted adviser to the client,” he says. “That is where the true value of the policy lies.”

Coles says when a K&R policy is purchased, companies are given an emergency 24/7 response line which goes through to a trained ‘hand-hold’ expert.

“So when a client thinks they have an incident they will be provided with immediate telephone advice,” he says.

“The hand-holder will be located in the country where the impacted company is based and will spend the first 24 hours of the crisis with the company directly.

“This is because the first 24 hours of any incident are fundamental to the final outcome of that incident.”

Coles adds that, in terms of claiming on the financial strand of the coverage, the key element is getting that ransom money to the kidnappers, “plus any other costs such as psychological counselling, medical expenses, and the salary of the victim while they are in captivity”.

Coles says that K&R insurance is becoming more attractive to almost all industry types, rather than just the traditional clients who are travelling to high-risk areas.

“More and more people are becoming aware of these types of attacks and that the attacks can happen almost anywhere, and at any time,” he says.

“More companies are seeing it as good corporate governance to have a [K&R] policy in place.”