Kidnapping and Ransom (K&R) Insurance
There’s been a lot of talk lately about the number of foreign hostage situations occurring in countries like Columbia and Peru, but more specifically among the international workforce in the oil fields of Nigeria. In July 2009, Reuters reported that over 500 people had been kidnapped in Nigeria, which at the time was a 70% increase from 2008. Even worse, a NPR report revealed that more than 7,000 kidnappings were reported in Mexico in 2008 alone.
Because so many people have been kidnapped overseas, a new type of insurance has emerged: kidnapping and ransom insurance. It is available to companies that believe their workers may be in danger of becoming hostages while working in a foreign country.
Kidnapping and Ransom Insurance Basics
Kidnapping and ransom insurance in general covers the demands of a kidnapper who is holding a person ransom. You may find this type of coverage under a number of names depending on the company that offers it, including kidnapping insurance, kidnap insurance, ransom insurance, extortion insurance or any combination.
The main purpose of this type of insurance is to make sure that a person who has been kidnapped can be retrieved without having to raise the money independently. You may think that there wouldn’t be a great need for this type of insurance, but it has become so popular in recent years that it is now available as a part of some comprehensive business insurance packages, as well as stand-alone policies for individuals. You may even be able to find it as a part of some home insurance policies.
What Does It Cover?
What kidnapping and ransom insurance covers truly varies depending on the company you work with. For instance, if you go to another country and find yourself in this terrifying position under the protection of a corporate policy, the insurance will generally cover hostage-negotiation fees, lost wages and the ransom amount.
According to information found via Peterson International Underwriters in Valencia, Calif., kidnapping and ransom insurance could cover:
- Informant money
- Accidental death
- Ransom money
- Reward money
- Negotiation services
- Loss of ransom in transit
- Medical services and emergency evacuation
- Interpretive and forensic services
- Business security consultation
- Crisis management services
- Legal liabilities
- Family counseling
- Rehabilitation and more
The main benefit of this type of insurance, according to the NPR report, is that a company can take full advantage of a kidnapping and ransom (K&R) consultant who will advise them on not only about how to prevent kidnappings, but also how to walk through the negotiation process if a kidnapping were to occur.
The consultant must determine the worth of a kidnapped person to a particular country, and will draw up a target settlement figure, as well as how long they think the negotiations would take and how much it would cost them (the consultant) to stay and help.
Is Kidnapping and Ransom Insurance Necessary?
Kidnapping and ransom insurance has definitely become more important in recent years because more people have been in danger of being kidnapped. In fact, according to the Reuters report, so many workers have been kidnapped over the past three years that many companies ranging from energy to construction have decided to withdraw as much non-essential staff as possible.
And for good reason.
Here are just a few of the kidnapping stories that have received more press coverage in recent months.
- In June 2009, British oil worker Matthew Maguire was released after being held captive by the primary Nigerian militant group, the Movement for the Emancipation of the Niger Delta (MEND) for nine months. In another incident, a 45-year-old Canadian woman was kidnapped in the northern part of the country and was released two weeks later unharmed.
- However, there are incidents where the kidnappings did not end pleasantly. For instance, in some Mexican cases where hostages may get released, they often suffer along the way due to having their fingers or other extremities cut off.
- Even worse, some of the kidnappings extend beyond the workers to their families. This was the case with a Royal Dutch Shell worker in Nigeria whose 9-year-old son was abducted by gunmen in Jan. 2009, after his 11-year-old daughter was shot dead. Fortunately, the son was released unharmed a week later. Casualties in kidnapping can easily extend to families.
As a way to increase the likelihood that those workers and their families located in dangerous countries can return home safely, many companies and individuals have found kidnapping and ransom insurance to be invaluable.
Do You Need Ransom Insurance?
You may indeed need this type of insurance if you travel abroad for work. In fact, you may already have this type of policy without knowing it. According to a recent Forbes article, many companies cannot tell their employees that they’re covered because it could void the contract.
The worry with employees knowing is that there could eventually be some foul play on the employee’s behalf (asking someone to kidnap them for the money). Also, since most kidnappers want no one involved but the hostage and the person/company holding the ransom money, too many people knowing could put the hostage in even more danger.
The cost for this type of coverage can vary but might range anywhere from $3,000 for a $1 million, one-month policy up to $350,000 for a $10 million policy, so it can definitely be pricey. But many would argue that the cost associated with the insurance is well worth the benefit of getting the workers back unharmed.
Unfortunately, because economic and political states have worsened around the world, many militant groups have emerged to make their presence known. This means, the need for K&R insurance has and will likely continue to increase, even in the midst of a deep recession.
Do you have kidnapping and ransom insurance already?