The expansion of Asian businesses across the globe highlights the value of kidnap and ransom insurance

Late last year, XL Group established kidnap and ransom insurance capabilities in Asia by transferring London-based specialist underwriter Alex Smith to its Hong Kong offices.

Smith told StrategicRISK that his appointment in Asia was “a direct response to growing demand for such products from local corporations”.

This demand, Smith said, was driven by Asian companies expanding their business operations outside their domicile to the Middle East, parts of Latin America, Africa and emerging markets.

Indeed, according to Control Risks’ 2015 Risk Map, six of the top 10 kidnap countries in the world are on our doorstep: India, Pakistan, Iraq, Bangladesh, Afghanistan and Lebanon.

However, as Smith explains, today kidnap and ransom insurance is about more than providing coverage for its namesake risks.

“Although the threat of kidnap itself is an age-old concept, its application today is changing, as we have seen with the advent of threats such as virtual kidnappings and electronic extortions,” he said.

“Our coverage has now been expanded to cover extortion, products extortion, cyber extortion, hijack, wrongful detention, threat, disappearance, express kidnap, hostage crisis, child abduction, assault and political evacuation.”

Partner at the insurance team of CBP Lawyers Kemsley Brennan says the general types of kidnap and ransom insurance coverages are: kidnapping of an “insured person”; extortion threats against an individual insured person or an organisation; hijacking of aircraft, watercraft or vehicles; and wrongful detention of an insured person.

“Historically the kidnap, ransom and extortion [KRE insurance] policy was purchased by organisations with international operations and branches, particularly in regions which were remote or known to have political instability,” Brennan said.

“However, most organisations with a public profile, and who are generally operating in multiple international locations, now purchase kidnap, ransom and extortion cover.”

Crisis consultants

Michael Lincoln, national underwriting manager of crisis management, Liberty International Underwriters, says kidnap and ransom insurance’s most important benefit is the response capability provided by crisis consultants.

“The handling of a kidnap incident is a unique skill set and often a very high pressure situation — crisis consultants have the skills and experience to know how best to act in such a situation,” he said

Des Partridge, specialist underwriter at Catlin Group, adds that all companies have a duty of care towards their employees, and this is particularly applicable to those operating or sending their staff into politically sensitive or unstable regions.

“A kidnap and ransom policy is more than a promise to pay when an incident occurs,” he said.

“It allows access to expert consultants and pre-incident security training, regular updates about sensitive areas and what sort of measures should be taken, and the means to provide every possible care to affected employees, from psychiatric and medical assistance, to rest and rehabilitation.”