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In today’s world of global business, the threats against your company are varied, and for businesses sending employees to international destinations, the risk of kidnapping is a growing reality. Particularly in high-risk regions with extreme poverty or corrupt law enforcement, kidnapping and holding U.S. business professionals for ransom has become a common occurrence and a viable, yet illicit, means of making a living.
Many studies estimate global ransom revenue generated per year to be in the billions of dollars and growing. In order to protect against the financial impact of this real and ever-expanding threat, businesses that are particularly exposed to this risk can purchase Kidnap and Ransom Insurance.
What is Kidnap and Ransom Insurance?
Kidnap and Ransom Insurance, also known as K&R Insurance or Kidnap, Ransom, and Extortion Insurance, is typically a stand-alone policy that protects your business from financial losses as a result of kidnapping, ransom, or extortion demands.
Your software company is selling to a business in Mexico, which requires an in-person meeting in Mexico City. The sales manager and sales representative on the deal travel to Mexico City to work out terms of the deal. During their trip, the sales manager and representative take a taxi that is suddenly hijacked. The hijackers take the passengers hostage and demand a ransom of $2.6 million from your company. Kidnap and Ransom Insurance would protect your company from the financial losses as a result of having to pay the ransom.
Kidnap and Ransom Insurance is particularly important for companies that frequently send employees abroad to high-risk areas. K&R Coverage will protect against events related to:
- Kidnapping and ransom: Abducting an individual against their will, holding them captive, and demanding payment in exchange for their release.
- Wrongful detention: Holding an individual in custody unlawfully for reasons other than kidnapping. This is often done by a government or quasi-government entity for political reasons.
- Extortion: Demanding payment through force or threats to injure or kill an individual, damage property, divulge trade secrets, or spread a computer virus.
- Hijacking: Unlawfully seizing an aircraft, vehicle, or ship and holding an individual against his or her will for an extended period of time.
Do I need Kidnap and Ransom Insurance?
If your company does business internationally and has employees traveling or stationed abroad, especially in high-risk regions of the world, Kidnap and Ransom Insurance may be a wise investment. Kidnappings continue to occur at high rates in areas of extreme poverty or political unrest, with foreign travelers, particularly business travelers, being the prime targets.
Countries with a higher incidence of kidnapping include:
- South Africa
K&R Insurance is applicable to businesses both large and small. To a kidnapper, business travelers all represent the same opportunity for cashing in on a ransom, and there is little to distinguish a business traveler from a large or small company.
Benefits of Kidnap and Ransom Insurance
Aside from providing your business with financial protection, K&R Insurance also generally includes other helpful benefits for when you are facing a kidnapping or extortion event. These include:
- Access to a network of professionals: If an employee of yours is kidnapped, you’ll need assistance from a variety of seasoned professionals who have dealt with these types of crises. From negotiators to psychiatric care professionals, your insurer will deploy a team of experts and consultants who can remediate the situation as quickly and safely as possible.
- Risk mitigation services: Some insurers offer training for your employees, in order to educate them on how to limit their risk to potential kidnappings and how to handle a hostage situation if the need arises.
Two reporters from your media company travel to Saudi Arabia on assignment. During their time there, the reporters are detained by the local government on suspicion of inciting anti-government sentiment. The reporters are imprisoned and intensely interrogated.
You have a Kidnap and Ransom Insurance policy, and the insurer contacts you with assistance from a team of crisis consultants who have experience dealing with wrongful detention. The consultants access their network of experts and help in providing intelligence and mediating the release of the reporters. Moreover, your insurer also provides a post-event risk assessment to ensure the health of the reporters.
What does Kidnap and Ransom Insurance cover?
Kidnap and Ransom Insurance is designed to protect businesses from financial losses caused by kidnapping, extortion, and ransom demands. Coverage generally includes:
- Ransom and extortion payments
- In-transit money delivery coverage
- Consultant costs
- Negotiation costs
- Public relations costs
- Interest fees coverage
- Judgement settlements
- Defense costs
- Harm to the captive individual and his or her family, including:
- Death and dismemberment benefits
- Medical costs for injuries
- Psychiatric treatment after the individual is freed
K&R Insurance can also include coverage for spouses, relatives, guests, nannies, and housekeepers.
Note that for ransom and extortion coverage, the insurer would not pay the kidnapper directly. Your company would need to pay the kidnapper first and then receive reimbursement from the insurer. Generally, this means that you cannot purchase a policy that covers more than your company has in assets.
What are the important conditions and exclusions of Kidnap and Ransom Insurance?
K&R policies differ from insurer to insurer, and some possible exclusions may include:
- Sanctioned countries: Policies may exclude countries that the U.S. has imposed sanctions on, like North Korea or Iran.
- War and terrorism: Some policies exclude coverage of travel in countries that are experiencing civil unrest or war.
- Criminal activity: Policies generally exclude kidnapping or extortion that results from dishonest, fraudulent, or criminal activity by the insured company or employee.
Insurers strongly advise that employers do not reveal to employees that they have Kidnap and Ransom coverage, and insurance carriers may declare the policy null and void if the employer reveals this information. This confidentiality provision is designed to prevent employees from revealing their coverage to others, thus making the employees lucrative targets, as well as to prevent fraudulent kidnappings.
How much does Kidnap and Ransom Insurance cost?
The cost of Kidnap and Ransom Insurance depends on a number of factors, including:
- Country of residence
- Travel history of employees
- Plans for employee travel
- Company revenue
- Number of employees
- Benefit amount
Ultimately, the higher the risk of travel, the more expensive the premium will be. While some lower risk plans may cost a few hundred dollars annually for a single employee, plans for companies that travel often to high-risk areas may cost upwards of tens of thousands of dollars.
Kidnap and Ransom Insurance is not for every business, but for those businesses that have employees who travel abroad often, particularly in high-risk areas of the world where kidnappings or wrongful detentions are more prevalent, it may be absolutely critical. With ransoms that can quickly run up into the millions of dollars, K&R Insurance could play a crucial role in helping to stave off financial ruin, and at the same time, assisting with the successful remediation of a hostage situation.