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Kidnap, Ransom, Extortion: Can It Happen to Your Business?

An Associated Press headline screams “Tape of beheading posted on web.”  It’s a sign of the times-as corporate executives, employees and contractors become pawns in terrorists’ arsenals worldwide.

Companies with international operations or employees who travel abroad face increased liability for the safety and security of their workers, not to mention the unexpected costs that ensue from a kidnapping. While some terrorists use kidnapping as a weapon in their “jihad,” or Holy War, money motivates most kidnappings. Demands for ransom and the related costs associated with managing a kidnapping crisis can run in the tens of millions of dollars.

Large global companies aren’t the only ones at risk. Small to medium-sized businesses can be victims of violence or extortion threats against property or product contamination perpetrated by disgruntled and/or former employees, as well as domestic terrorists.  The financial impact can be devastating.

Mitigating risk

A security firm can provide companies with advice and assistance in dealing with such threats. These experts can help businesses review their risks and take steps to mitigate them, such as:

·   Developing appropriate policies and procedures to deal with threats and emergencies

·   Enhancing the physical security of offices and buildings

·   Establishing a crisis management team to oversee planning and coordination

·   Providing cross-cultural, kidnap prevention, conflict-management, self-defense and survival training for workers going overseas

·   Engaging resources, such as the U.S. Embassy, to provide specific reports on safe places and areas to avoid in foreign countries

·   Purchasing Kidnap/Ransom and Extortion insurance

Insuring against the threat

Companies get a valuable combination of coverage and services with a Kidnap/Ransom and Extortion policy.  First and foremost, these policies provide broad protection from the financial loss associated with a kidnapping and/or extortion threats against the company’s merchandise, property, proprietary information, computer systems or employees.

Depending on the policy, coverage can include ransom payments, hostage-negotiating fees, consulting fees, loss of income, interest on bank loans taken out to pay a ransom, informant rewards, medical/psychiatric care for the employee kidnapped, as well as rest and rehabilitation costs, and accidental death or dismemberment payments. Corporate policies can even pay for interpreters, travel expenses and the cost of hiring a replacement.

Kidnap/Ransom and Extortion policies also offer policyholders access to a range of consulting services-from incident prevention to response resources.  Even those businesses that can afford to pay the ransom can benefit from the kind of services provided. Security consultants are available to assist with independent investigations, arrangement and delivery of ransom funds, mobilization of international resources, forensic analysis and family counseling.

Policies vary greatly. They come in a wide range of limits-from the $5 million to $10 million limit to $50 million. The premium rate is higher for coverage in risky geographic areas, such as those on the State Department’s travel restriction list, like Nigeria, Iraq and Indonesia, and may exclude some countries. High-risk areas include the Middle East, Latin America, Eastern Europe and Asia. 

Some policies are available with no deductibles, while others have large deductibles. In addition, policies may require that the policyholder not reveal the coverage’s existence. This is to prevent knowledge of the policy from encouraging a kidnapping or extortion plot.

With the threat of terrorist activities growing, companies large and small, particularly those that send employees overseas on business, should talk to an insurance agent about their risk and how to protect their human and corporate assets.