July 26, 2014 Kidnapping and Ransom: Is Your Business Prepared?

Volume 17 | Issue 5

Earlier this year, the U.S. Department of State issued another warning to U.S. citizens about the risk of traveling in Mexico due to threats

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In the statement, it said the number of kidnappings throughout Mexico is of particular concern and appears to be on the rise — increasing over 30 percent over the previous year.

Keeping this background in mind, businesses should think hard about what risk mitigation measures they should put in place for workers in potentially dangerous or unstable regions and what they can do to protect their employees.

Kidnap and Ransom (K&R) policies are relatively inexpensive and serve two main purposes:

• To financially reimburse companies for losses that they sustained from an insured event (e.g., kidnapping, extortion, hijacking and detention); and
• To provide priority access to highly experienced crisis response consultants, who offer invaluable advice to clients during an incident.

Many companies have turned to the protection of K&R insurance as they grow their global footprint or operations. While businesses expanding overseas face varying risks, opportunities for criminals arise more frequently where the national government does not have control over the security of its citizens. In other words, kidnappers operate more freely in places in which they’re confident the police are not going to track them down and where people can be hidden – such as the jungles of the Niger Delta, remote villages in Somalia and certain gang-controlled neighborhoods in Mexico.

Many organized crime groups view kidnapping as a money-making business model that works: they receive ransom money and the hostages usually goes free.

Who should consider K&R coverage?

• Companies with employees operating in dangerous and politically unstable areas where there’s kidnap risk;
• Businesses or non-profit organizations that are vulnerable to threats of property damage and disclosure of proprietary information (including blackmail); and,
• Companies that are especially vulnerable to risks of extortion, threats to kill, injure, and abduct. For example, companies with strong brand name recognition, recent layoffs, changes in policies or affiliation with other vendors may be particularly vulnerable to these risks. And these threats do not always come in the form of ransom demands. In some cases, nefarious individuals or organizations may try to halt a company’s production or instill fear in its employees.

While these kidnappings may not make headlines, they often happen in what many would perceive to be fairly benign, low-risk countries. Even a fairly low-level threat of extortion can have a strong negative effect on a business. It can be frightening for staff members and time-consuming to address.

Mark Harris, director of crisis response services at Olive Group, which is exclusively available to Travelers’ policyholders as the responder for all of its kidnap and ransom policies, feels strongly that companies should be proactive when making these considerations.

“The very least a company should do is make sure its employees are briefed by someone on personal security and how to survive as a hostage, and feel reassurance that their employer has measures in place to secure their freedom in the event of this kind of crisis,” said Harris. “Preparation and preventive measures are not a luxury any more. They’re simply a cost of doing business.”

Working on the theory that “an ounce of prevention is better than a pound of cure,” companies should perform appropriate due diligence to learn the exact political and criminal enforcement situations in the country in which it plans to work in order to gauge whether its staff will be at risk.

Once an employee is working overseas, it is extremely important that they are aware of the environment around them and know which activities may create a threat. They should also take certain steps to protect themselves against possible incidences. For example, employees should identify safe havens on their route to work such as police stations, hotels or other secure, well-frequented locations. Typically, simple changes will help, such as varying your routes and timing when traveling to work or using different transport methods. Breaking up a routine can prevent would be kidnappers from getting a fix on employees and potentially abducting them.

In places where kidnapping is a serious problem, a company may consider contracting security personnel such as drivers or escorts who, in high-risk areas, may be armed.

Sketchy Picture
Statistics on kidnappings are generally unreliable and often paint an insufficient picture of the environment. In Latin America and Central Africa, where there are between 12,500 and 25,000 kidnappings each year, perhaps only 10 percent of cases are reported. Also, open-source figures for kidnappings often do not differentiate between cases involving workers taken for ransom and children taken by parents in disputes over custody.

Even when a kidnapping is acknowledged, companies rarely give details surrounding how the incident was resolved because of the potential to make their employees more vulnerable.

Numerous sources name some of the top countries for kidnapping incidents in 2013 as Mexico, Nigeria, Pakistan, Syria and Venezuela. Olive Group believes the threat of kidnapping remains a major issue in many other countries beyond this list.

Against this backdrop, taking measures to minimize risk to employees is crucial. In a global economy, these kinds of preparation and preventive measures can no longer be considered outliers. They’re appropriate and necessary considerations that must be made for the safety of employees working abroad.

Khamla Vorasane, a kidnap and ransom (K&R) insurance specialist, is Travelers’ Lloyd’s Syndicate 5000 K&R underwriting manager. Vorasane joined Travelers from ACE USA, where she most recently served as assistant vice president within the private/not for profit management liability business, and held responsibility for the company’s K&R book of business. Before joining ACE in 2003, she was a senior consultant of control risk information services for Control Risks Group, an independent, global risk consultancy specializing in political, integrity and security risk.

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