Kidnap Insurance: Does Your Company Need It?
In December 2012, star NBC News correspondent Richard Engel and his news crew were kidnapped and held for five days by unknown assailants while reporting on the civil war in Syria.
The group was travelling with Syrian rebels when 15 gunmen loyal to the Syrian government ambushed their vehicle and loaded them into a waiting truck before blindfolding them and subjecting them to what Engel characterized as "psychological torture" including mock executions and death threats. After five days, their captors were caught in a fire fight at a rebel checkpoint and everyone was rescued and released unharmed.
Meanwhile, while Engel and his crew were missing, NBC tried to keep the entire ordeal under a media blackout, knowing that if the kidnappers knew who they had captured, they would try to capitalize on Engel's notoriety and the danger of the situation would surely escalate for the entire crew.
Journalists, particularly foreign correspondents, are extremely appealing targets for kidnapping around the world, but you don't have to be an American journalist on a globally recognized network to be at risk.
"Any company that has employees who are travelling internationally and have exposure in questionable areas has a duty of care to ensure that the places they're sending those employees are safe. They have to look at the types of risks they will face, mitigate those risks where possible, and finally, transfer them where appropriate," says Sophie Strezos-Egnatis, Vice-President of Business Development at Hunter McCorquodale, a division of Simmlands Insurance Services Ltd..
Most corporate kidnap policies are structured to cover all employees, officers, and directors equally. This is due to the fact that kidnappers for the most part don’t care whom they capture and look for the easy take. This means that oftentimes it’s the average employee travelling or working abroad that is most at risk.
But it's not just the typical high-risk locations everyone thinks of, like Syria and Afghanistan, where employees are at risk for kidnapping. Mexico has one of the highest kidnapping rates in the world, and many corporations use that country as a popular destination for conferences.
"It's highly recommended that if you're sending an employee to locations like this, that the proper coverage is in place," continues Strezos-Egnatis.
If you regularly work internationally in a potentially targeted industry, such as the non-profit sector, kidnap insurance is probably something your employer should look into. From an individual perspective, more and more Canadians have international ties and go back home frequently to visit family, but they may be visiting countries that aren't politically stable and that could put them in the crosshairs of a kidnapping plot. Columbia, Honduras, Russia, and even India are just some of the other leading countries where kidnapping is a legitimate danger.
"The reality is that 80 per cent of kidnappings go unreported. Therefore, any statistics you find, you'll have to multiply that by five or six because kidnappings are not reported for a number of reasons," says Strezos-Egnatis. "The two top ones I would suggest would be distrust in the local authorities and that public knowledge of the kidnapping and ransom demand could make your organization a bigger target down the road and put your employees more at risk. Plus, it's very negative from a PR perspective."
Kidnap insurance is a policy offered by Hunter McCorquodale through Lloyd's of London and it offers reimbursement of the ransom money in the event of a kidnapping, as well as a number of other reimbursable expenses, such as expenses related to managing the kidnapping and counselling for the victim's family.
"But the most important feature of a kidnap and ransom insured policy is access to a dedicated crisis response team," says Strezos-Egnatis. "Many corporate entities have access to a lot of money. They can pay, but paying quickly isn't necessarily the best option because if you make it too easy, you are now a bigger target. Knowing how to negotiate a kidnapping, which varies by country, is so valuable in making sure that the victim comes home alive and well."
The crisis response team is comprised of trained negotiators, with international political and security risk expertise, who will deploy to a confirmed incident site within 24 hours. However, they will not make themselves publicly known. Keeping the policy in strict confidence is a serious contractual obligation for both parties.
"This policy will not be in your company's group benefits book. Knowledge of the policy is disclosed only to top management. If they publicize it widely, the policy becomes void. This is because knowledge of the existence of the policy can put insured persons at greater risk and, in the event of an actual kidnapping, will severely hamper the negotiation process," says Strezos-Egnatis, adding that the team can also provide information on everything from security issues to hotel recommendations in the destination country, so you can help mitigate kidnapping risk even before departure.
Lending an extra sense of security is the fact that once you complete an application, the policy can be in place within 24 hours. The application is available in both business and individual varieties and both ask questions such as personal net worth for individuals, or the company’s net assets in respect to corporate policies, where you or your employees travel internationally, and whether you or your employees have ever been involved in any prior threats or incidents of kidnapping.
"Pricing has nothing to do with age and health status. In this case, it's more about where you go, what your net assets are, the industry in which you operate, and whether you or your company are highly recognizable," says Strezos-Egnatis and as in all insurance policies, the higher the risk, the higher the premium.
"Most people assume that with a dedicated response team, and all of the features that come with the coverage, that the insurance premium would be very expensive, but it's much more cost-effective than customers expect," says Strezos-Egnatis.
For example, you'd never pay less than $1,000 annually, unless you're bundling it with other products, but the highest premium Strezos-Egnatis quotes is in the neighbourhood of $100,000 annually. This would be for a non-profit humanitarian organization with existing kidnap issues. For the average corporate buyer, the premium is well under $5,000 annually.
What about policy limits? You might wonder what is an appropriate amount of insurance for this little understood product. "The initial demand is always higher than what the company ends up paying, it’s a natural part of the negotiation process" says Strezos-Egnatis. Most people think that ransoms are paid in the millions of dollars and although sometimes this is true, statistics show that the average ransom actually paid is typically no more than $100,000 or less per person; however, there is often more than one victim involved in a single event, so this number can multiply."
"For the average Canadian company or individual, a million-dollar policy is typically more than adequate to cover the ransom at the end of the day, however, those involved in certain industry sectors or international travel locations should consider higher limits" says Strezos-Egnatis. It is also important to note that most insurers, regardless of the policy limit, will pay unlimited fees and expenses towards crisis response services.
But how successful is the provided crisis response team in getting people back? Strezos-Egnatis confirms that with a professional team in place, the victim was released safely in 90 per cent of cases.
"There's this Hollywood notion that a rescue team swoops in and saves you, but that's not true," says Strezos-Egnatis. "The crisis team is made up of trained negotiators, not rescuers and kidnap insurance covers a number of contingencies outside of kidnapping, including extortion, hijacking, and illegal detention."
If you think your government will respond and save you, that notion is hit or miss. At this time, Canada has no national kidnapping or hostage-taking policy. Although, according to diplomatic cables leaked by WikiLeaks, they did seek advice from the U.S. Government on creating such a policy that closely mirrored that of the U.S. However, the legislation created from those talks died in 2009 when Harper's government prorogued parliament.
Among the issues on the table, "How to treat government employees versus contractors, how to handle situations where Canadians had insurance companies with written kidnapping policies, and negotiation strategies," writes CBC.
Given that there is no current national strategy, kidnap insurance is your best bet.
"Kidnap insurance allows you to transfer the financial risk to an insurer and provides you access to valuable resources together, which gives you a greater measure of control over an unforeseen incident and allows you to get on with your business," says Strezos-Egnatis.