Kidnap and extortion is a legitimate threat for U.S.-based businesses. Unfortunately, in many parts of the world, these illegal acts have become a business in and of themselves, with sights set on wealthy U.S. companies and business travelers. In most cases, kidnappers take professionals captive to make a profit, releasing the individual once demands have been met. Because many overseas attacks are related to business, the need for kidnap & ransom insurance coverage continues to grow. This is particularly true in areas where law enforcement has a blind eye to guerilla activity and in areas that are stricken by poverty. To combat financial losses in the event of a kidnap or extortion situation, Kidnap, ransom and extortion (K&R) insurance is a practical risk transfer option.
This Coverage Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
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What is Kidnap & Ransom Insurance Coverage?
K&R is typically a stand-alone policy for employees engaged in international business travel. It covers costs relating to events such as:
- Kidnap and ransom: seizing an employee with the intent to demand money in return for the employee
- Wrongful detention: confining an employee under the guise of government
- Extortion: demanding money with the threat to injure or kill an employee, damage property, divulge trade secrets or spread a computer virus
- Hijacking: holding an employee for an extended period of time against his/her will on an airplane, motor vehicle or ship.
Coverage includes ransom and extortion payments, in-transit money delivery coverage, consultant costs, negotiation costs, public relations costs, interest fees coverage, judgment settlements and defense costs. The policy also covers harm to the captive employee and his/her family such as death and dismemberment benefits, medical costs for injuries and psychiatric treatment after the employee is freed. Coverage is particularly helpful during times of negotiation, as experts are provided to the company to successfully free the captive employee with minimal harm.
In addition to purchasing proper coverage, check with your insurance carrier to see if they offer training sessions for traveling employees to educate them on how to react in a hostage situation. The training typically provides insight on how to initially deal with captors until an expert is available to take over negotiations.
Insurance carriers also advise that employers not reveal that they have K&R coverage. This confidentiality provision is designed to thwart employees from revealing to potential captors that they are insured. A large K&R insurance policy may make the employee a lucrative target.
Who Needs K&R Insurance Coverage?
Companies operating overseas need K&R insurance to protect their traveling employees. This applies to businesses of all sizes—kidnappers do not prefer larger companies over the small ones. In this business, everyone with money is considered a good target.
The coverage is particularly beneficial for employees who travel to regions of the world that are considered high risk. Countries with a consistently elevated rate of kidnaps and/or extortions include Afghanistan, Brazil, Honduras, India, Mexico, Nigeria, Pakistan, Philippines, Somalia, Venezuela and South Africa.
Underwriting Considerations
The premium for this type of coverage is generally based on the following:
- Type of industry
- Revenue of the insured company
- Country of residence
- Travel patterns of the employees
At TPG Insurance Services, we can assist you in designing a K&R policy that meets your company’s specific needs. We work closely with K&R insurance carriers to ensure you have the coverage, training, and support you need when you need it most. Reach us today at 909.466.7876 for more information, and check out our International Travel Insurance benefits too!
