Insuring against employee kidnapping and ransom

Unfortunately, it can sometimes be a very dangerous world. In some countries, kidnapping for ransom and business extortion have become a means for lawless individuals and gangs to make money. Quite aside from the personal trauma, the kidnapping of an employee can lead to significant financial losses, not only from ransom payments but also from associated costs such as business interruption, litigation, adverse publicity and long-term reputation damage. 

Even an incident when no ransom is paid can create unexpected costs and have a significant impact on a business’s balance sheet. A kidnap and ransom (K&R) policy can cover a range of costs associated with a kidnapping incident, such as fees for negotiators, attorneys, public relations professionals and other contractors; reward money; medical costs; travel expenses related to the incident; and other costs.

While taking preventive steps is always a good practice, it is especially important for businesses to take measures to reduce vulnerability to kidnapping, ransom and extortion. Your K&R insurer will likely want to work with your company to assess and minimize these risks.

What kidnap and ransom insurance covers

K&R coverage will help your business recover costs associated with incidents of:

• Kidnap and ransom—in which employees are seized and held captive until ransom is paid.
• Extortion—illegal demands for payment to prevent harm to employees, damage to property, theft of trade secrets or similar action.
• Illegal detention—when employees are illegally held by rogue law enforcement or government officials.
• Hijacking—when employees are held against their will aboard planes, ships or other vehicles.

K&R policies reimburse businesses for a range of costs tied to kidnapping and extortion incidents. Depending on the insurer and policy, costs covered can include:

• Ransom payments.
• Loss of a ransom or extortion payment, due to theft or confiscation.
• Costs for security consultants (e.g., investigators, ransom negotiators) and crisis management, forensic analysts, legal services, public relations consultants.
• Travel and accommodation costs.
• Salary of a kidnapped, detained or hijacked employee.
• Rest and rehabilitation expenses.
• Interest costs for ransom loans.
• Fees for security guards.
• Medical costs.
• Death or dismemberment benefits.

You may be able to add other types of coverage to a K&R policy, such as reimbursement for lost income and emergency evacuation costs.

While kidnapping, ransom and extortion can theoretically take place in any nation, including the United States, these crimes are more common in specific regions of the world. Countries with a high incidence of kidnapping and ransom include Afghanistan, Colombia, India, Iraq, Mexico, Nigeria, Pakistan, the Philippines, Somalia, Venezuela and Yemen. Incident rates vary year to year depending on economic, political and other factors.

Prevention and protective services

Your K&R insurer will likely include consulting services and training to help you and your employees reduce the risk of kidnapping and ransom. In addition, security consultants can provide your business with training on prevention as well as guidance about what employees should do if they are kidnapped.

Many businesses do not want to contemplate highly traumatic events such as kidnapping and extortion. However, anticipating such an event and taking action—from risk assessment to prevention training to purchasing K&R insurance—can help limit the overall damage to your business and personnel if such an incident occurs. If your employees travel to high-risk nations, it is advisable to at least discuss K&R coverage with your insurance professional.