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Technology Insurance
Loss Scenarios for IT Firms

Kidnapped on business
Traveling overseas to visit a regional office, the owner of a family-run business was abducted. The kidnappers demanded a $3 million ransom payment from the executive’s company or else they would kill him. A security consulting firm was immediately called in to deal with the situation and the kidnappers.

RESOLUTION Because of the consulting firm’s experience and knowledge of the country, it successfully engaged the kidnappers. Over five months and after many contacts, the consultants negotiated a final ransom of $625,000, delivered the payment, and recovered the victim unharmed.


Terrorist activities have been increasing substantially


Worldwide terrorist activities have been increasing substantially over the last few years. Kidnap/Ransom for the personal assets of wealthy executives and to extort large sums of money from banking institutions and leading business corporations have been ways for terrorists to obtain large sums of money for their terrorist activities. There is no doubt that these activities affect the life style of the business executive and influence the corporation's investment decisions abroad.

Most kidnappings are carried out in order to obtain a ransom, and in most cases a ransom is paid. Rescues are rare, largely because the authorities in most countries recognize that the safety of the victim is paramount.

The size of ransom demands are growing each year. Prior to the 1970's no terrorist group demanded as much as $1 million. Today, there are usually a number of kidnappings where demands run as high as $10 million.

More and more financial institutions and corporations that operate multinationally are taking steps to protect their businesses and employees against terrorist attacks. Companies are hiring experts to provide advice on the socio-political environments in which they operate, purchase kidnap insurance for their key executives, and improve the physical security of their offices.

Annual totals for kidnappings grew more than 100 percent from 1995 (830 kidnappings worldwide) to 1999 (1,728). The combination of political unrest, poverty and lawlessness are the main reasons that kidnappings have increased.

More companies are realizing the importance of managing these unexpected and diverse risks through ForeFront PortfolioSM, Kidnap/Ransom and Extortion Insurance coverage from InsureCast. It can help mitigate the catastrophic costs of the ransom or extortion payment and the related costs associated with managing through these types of crises.

Kidnapping-related expenses, including hostage-negotiating fees, lost employee wages and ransom fees, consulting fees, death and dismemberment fees, personal financial losses, medical and dental costs, rest and rehabilitation, travel and accommodations, loan interest, forensic analysis, family counseling, cash benefits to victimized families and legal costs, including judgments and settlements, are usually covered under such Kidnap/Ransom and Extortion policies.


Kidnap and ransom insurance is not a new product

In fact, it was initially offered in 1932 by Lloyd's of London, shortly after Charles and Anne Lindbergh's baby was kidnapped. However, at that time it was primarily reserved for only a few companies or individuals that fit certain criteria, such as great wealth or business overseas in dangerous locales.

While no one can predict when or where a kidnapper or an extortionist might strike, there are steps you can take to help protect your company, your employees, and yourself in the event of such a threat.

Depending on the type of policy, kidnap and ransom policies cover some of the expense of dealing with kidnappers and their demands.


Latin America contains all of the top three countries for kidnappings

Companies should be aware of exactly which territories are considered to be high risk. The area that the employee is traveling to will affect the level of precautions that need to be taken, as well as the amount that the Kidnap/Ransom and Extortion Insurance policy will cost.

Latin America contains all of the top three countries for kidnappings in 1998. The annual Hiscox survey rates Colombia at number one with 516 kidnappings in 1998 alone. They have had a total of 4,040 kidnappings since 1991! Mexico is ranked second on the list, with 158 in 1998 and a total of 656 since 1991. Third is Brazil with 18 in 1998 and 523 kidnappings since 1991.


Kidnap/Ransom and Extortion Insurance


What is Kidnap/Ransom and Extortion Insurance?

Kidnap/Ransom and Extortion insurance provides numerous benefits and services to the applicant and the insured. Kidnap/Ransom & Extortion Insurance provides coverage for kidnappings and other events through a combination of financial indemnification and expert crisis management.

A basic policy can cover items such as ransom payment, loss of income, interest on bank loans, and medical/psychiatric care. Besides insurance, companies can also utilize crisis management teams and employee training in what to do in a hostage situation to minimize losses due to kidnap or ransom.

The Kidnap/Ransom and Extortion insurance covers named employees for individual or aggregate amounts, with deductibles requiring the insured to participate in about 10% of any loss.


When do I need Kidnap/Ransom and Extortion Insurance?

Kidnap Extortion and Detention are real dangers for companies operating both overseas and in domestic markets. They are often overlooked by management on the grounds that “it won't ever happen to us”, but the damage this can inflict on a business can be very severe - as the annual roll call of corporate and individual victims around the world testifies.

With over 1,000 annual kidnappings of professionals and executives world wide and numerous terrorists attacks, life and health insurance professionals should consider such policies for anyone who travels internationally.

Those persons who are perceived to be wealthy need Kidnap and Ransom Insurance. Not everyone generally needs it. A kidnappers’ perception of victim’s liquid assets may have little to do with the real value of the victim’s assets.

For people who travel frequently to high-risk regions such as Colombia and Peru, this coverage could be a life saver.


Why do I need Kidnap/Ransom and Extortion Insurance?

Kidnap and Ransom insurance plans provide assistance to the family and business with regard to independent investigations, negotiations, arrangement and delivery of funds, and numerous other services vital to a safe, speedy and satisfactory resolution.

Extortionists don’t discriminate. Any company of any size can be a target for extortion threats against the company and its employees. People tend to associate business extortion and kidnapping with global companies. The fact is, radical groups and criminals exist everywhere.

Kidnap/Ransom and Extortion Insurance will help you manage the costs associated with an extortion threat against your products, proprietary information, computer system or your people can be enough to push a small to medium-sized company to its financial limits.

These risks may not feel like everyday exposures, but too often they are. And when they happen, you may need financial assistance to meet extortion demands and the extensive costs associated with negotiation and recovery.

Due to globalization of economies, multinational companies need to prepare for the possibility of attacks on their employees and facilities virtually anywhere in the world.

Kidnap/Ransom and Extortion Insurance will help you negotiate with kidnappers. A person may have a net worth of one billion dollars. If the money is all in real estate except for $100,000 cash, in the absence of insurance, what would a family do? Raising the $1 million would necessitate selling property, which could take months.

Resolving an abduction once one has occurred requires the assistance of specially trained experts, and thus risk managers might look into the use of Kidnap/Extortion and Ransom insurance. A Kidnap/Extortion and Ransom policy is not simply a funding mechanism, but also includes a range of services, including security consultants and other specialists. Security consultants due to their expertise are the most essential component of the kidnap insurance policy. The consultant companies generally include kidnapping experts and professionals with extensive knowledge of the relevant issues, family counseling and the country where the kidnap took place. Because they are familiar with the local laws and the dynamics of kidnapping, they are able to act swiftly to mobilize international resources to solve the case.

Corporations that don’t want to assume all the financial risk carry Kidnap/Ransom and Extortion Insurance, even if raising money to meet a ransom demand does not pose much difficulty. Wealthy individuals and corporations think it more practical to carry Kidnap/Ransom and Extortion Insurance and pay a known premium, rather than assume all the financial risk.

Both personnel and corporate assets are exposed to loss when kidnappers attempt to extort ransom money for the safe return of kidnap victims. Insurance can be purchased to cover individuals or corporations for this risk insured as well as losses from extortion threats against property or product contamination.

An industry leader in kidnap/ransom and extortion insurance, InsureCast and Chubb Executive Risk has designed comprehensive insurance coverage to provide the maximum financial protection available in the event a corporation suffers a kidnapping or extortion crisis. Please go to our online CoverageCoach questionnaire to get a free no obligation Kidnap/Ransom and Extortion insurance quote.


Typical Kidnap/Ransom and Extortion Insurance coverage highlights include:

  • Broad coverage for extortion threats against the company’s merchandise, property, proprietary information, computer systems or its employees
  • Broad expense coverage for hijackings, wrongful detentions or political threats
  • Reimbursement for ransom or extortion payments
  • Broad expense coverage such as:
  • Access to a public relations firm Medical, cosmetic, psychiatric, and dental services
  • Rest and rehabilitation costs
  • Reward payments to informants
  • Salaries of employees and temporary replacement employees
  • Accidental death or dismemberment coverage
  • Optional emergency political repatriation expense coverage
  • Access to the crisis management

Actual coverage is subject to the language of the policies as issued.

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