The January rescue by Navy Seals of U.S. aid worker Jessica Buchanan and her Danish co-worker in Somalia highlighted the problem of kidnapping for ransom in Third World nations. Upon hearing that story, many risk managers probably breathed a sigh of relief that they have kidnap and ransom coverage. That would be a mistake. “Most companies are doing a ‘B’ job in this area,” says Matt McKinley, principal at McKinley International Risk Management, a Malvern, Pa., broker. “Risk managers know there is some kind of K&R rider in their policy, but they don’t know what it does or what it covers. When they send people abroad, do those people even know what number to call if they get a note under the office door threatening to blow their office up if they don’t make some extortion payment?”
That gets to another key point: kidnapping is changing. Classic kidnapping, with a person snatched and held for ransom, has evolved into “express kidnapping,” says Greg Bangs, product manager for crime, kidnap and ransom insurance at Chubb, “where people are grabbed, robbed and taken to an ATM, where they’re forced to withdraw money, and then get dumped, often stripped and beaten.”
Also increasingly common, Bangs says, is cyber extortion—criminals hack into a company computer, take down one component and threaten to bring down the whole system if they aren’t paid off. In product contamination extortion, crooks inject contaminant into a pharmaceutical or beauty product in a store, then report it and threaten to poison more of the company’s products if they aren’t paid a ransom.
“A lot of corporations, including very large ones, are not up to date on this,” Bangs says. He suggests companies examine their coverage to see whether it’s adequate for the types of attack now being mounted.
Major insurers like Chubb, AIG, and Lloyds of London have policies that cover all these exigencies, and coverage can be surprisingly cheap. Large companies could pay $45 to $75 per person per year to cover all expatriates, or about $1,400 for an individual executive, McKinley says. “Obviously, insuring for a place like Iraq or Somalia would be much higher.”
The worst countries for kidnapping are reportedly Mexico, Venezuela, Brazil, Nigeria and Columbia, with India rising rapidly on the list, according to Bangs.
Don’t bother asking folks at other companies for advice. Underwriters don’t want clients to discuss this insurance for fear that such knowledge could make their employees targets for criminals. Most K&R policies have a clause saying that if you say you have it, you lose it.
For a look at new insurance products that kick in if a company’s brand takes a beating, see Guarding Reputations.