Kidnapping for Ransom and Extortion on Increase in Emerging Markets

Booming emerging markets proving to be high risk areas for travelling business people

With kidnapping incidents in the spotlight right now, kidnap for ransom and extortion (KRE) insurance is increasingly becoming part of the corporate insurance arsenal, no longer seen as standalone cover by corporates, but as a part of the complete duty of care for their employees.

“There is estimated to be between 15 000 to 20 000 kidnap for ransom and extortion incidents every year, but the reality is that many more go unreported.  For this reason it makes it difficult to confirm whether such incidents are on the rise, but recent events in Nigeria and Yemen have refocused global attention on what is a terrifying, often terrorist-linked practice of raising funds for arms or political gain.  Many more incidents abound throughout the world, but by far the booming emerging markets are proving to be high risk areas for travelling business people,” explains Dani Ettridge of Aon South Africa.

“Emerging markets which are experiencing significant growth and seeing lots of investment and foreign business activity provide fertile ground for such incidents.  As business travel becomes more commonplace, we’re seeing more people in risky situations, more often.  While such incidents are often perceived to be associated with volatile, strife-stricken areas, it is no longer a case of these being isolated to such.  Kidnap patterns in Africa particularly show that expats from international companies and the personnel of international aid organisations are likely victims due to the high profile and perceived wealth of the company they work for.  But even the South Africa environment with its perceived low levels of law enforcement is conducive to the kidnapping professionals. Something of a kidnapping ‘culture’ is already well entrenched in the country, albeit mostly without the associated extortion part. Thus any business with travelling staff needs to be versed in the risks and preventative measures to be taken,” explains Dani Ettridge of Aon South Africa.  

The impact of a kidnap can be enormous. It is extremely traumatic for those involved and dealing with an incident can lead to significant losses from ransom payments, business interruption, litigation, adverse publicity and long-term damage to reputation. Every corporation with cross-border operations should consider protecting themselves and their staff against the risk of kidnap, extortion, detention and hijack. Due to the massive sensitivity of such risks, confidentiality is an utmost priority and it is a firm condition of KRE policies that the existence of the policy cannot be revealed to a third party nor all employees.

“KRE is a reimbursive insurance policy, which means the insurance company will reimburse a policy holder after a ransom is paid. While KRE insurance provides the financial security that any ransom paid will be reimbursed, the real value behind having KRE insurance is not the money.

“KRE insurance policies provided unlimited access to a professional and experienced crisis response team to assist in dealing with a covered event.  Specialist response consultants who are highly trained and qualified to manage such a crisis are invaluable, as is the advice and support to the victim’s family throughout such a traumatic incident,” says Dani.

The role of the risk advisor and their experience in reviewing and advising on the types of cover for specific regions is also paramount as KRE is a developing type of cover and not all policies are the same.  “Policies have had to evolve and adapt to changing conditions and environments since their introduction some 20 years ago.  Insurers have added on various extensions that adapt to the evolving elements of personal accident and injury involved with this crime.  The reality is that kidnap victims can at times be held for months or even years which means that the company would need to consider salary replacements for the time that the executive is not there, as well as consider loss of earnings for the company or the family. An event such as kidnapping could also trigger certain business interruption concerns and there is also an emerging risk of potential emergency political evacuation of employees that a company could be required to carry out.

The modus operandi of KRE is also constantly shifting.  While Somali piracy may have dropped off, incidents off the east coast of Africa have picked up.  Quieter shipping lanes mean that there are fewer potential victims.  Some insurers and negotiators have reported that as a result, “express” kidnappings are on the rise – unlike the more protracted cases of some piracy attacks, these involve fast, targeted grabs with shorter periods of detention and smaller ransoms.  Other negotiators reported that their most serious cases have been more protracted and the kidnappers more patient.  Understanding the minefield of kidnappings for profit simply cannot be navigated without the assistance of a professional, skilled crisis team.  

While having the financial security to manage such an incident is paramount, insurance alone does not reduce the chance of being kidnapped. Preparation and a helping hand from crisis professionals when things do go wrong will improve the chances of getting out alive.  

Prevention and pre-emptive risk management has to be the first port of call.  “Aon works with our clients to develop security guidelines to help reduce their vulnerability to attack. We also provide comprehensive and bespoke training for personnel who travel to high risk locations.  Aon’s WorldAware Solutions provides travel risk analysis, training and awareness, risk managed travel and incident response, incorporating the management of all travel risk exposure into one system that wraps around existing policies and relationships. After all the prevention work is done, at the very least KRE cover provides companies peace of mind that their people and reputations are protected in the result of a covered event and that they will have professionals to help them through,” concludes Dani.  

The best you can do as a prudent insurance buyer is assess your business needs, understand the risks of the regions where your employees conduct business, and consult with a knowledgeable risk advisor to implement a thorough risk analysis and training programme, while securing a policy that is favourable for your specific needs and those of your employees.

About Aon South AfricaAon  South  Africa  is  a  leading  provider  of  risk management services, insurance   and   reinsurance   brokerage,  human  capital  and  management consulting, and speciality insurance underwriting. The company employs more than 1300 professionals in its 16 offices in South Africa with its head office in Sandton Johannesburg. Aon employs over 1800 people on the African continent.

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About AonAon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United.

FOR FURTHER INFORMATION CONTACTTeresa SettasTeresa Settas CommunicationsTel: 011 894 2767Cell: 082 653 9935teresa@tscommunications.co.za