Kidnap – a booming industry

With more and more companies tapping into underdeveloped markets in Africa, Asia and South America to grow their businesses, the threat of kidnap, ransom and extortion has also grown, as a way for some of the locals to cash in on their country’s new found wealth. Insurer St Paul Travelers estimates that around 50,000 people are kidnapped or abducted each year.

Yet security experts and insurers say that the risk of kidnap is chronically undervalued, with only a small minority of firms bothering to take out insurance cover, or provide hostile environment training or personal security for their staff. According to a recent survey, 70% of Fortune 500 companies do not have a kidnap and ransom insurance policy for any of their staff members.

One cause of the lack of awareness is the fact that so few kidnap and extortion attempts are ever made public, and insurers are loathe to reveal how many such policies they sell or pay out on. However – without revealing figures – insurers confide that they are seeing more claims under such policies worldwide, and that claimants are not just confined to large multinationals. Small firms are equally at risk, especially since the demand for specialist outsourced services has grown.

According to Clayton Consultants, a US-based security provider, statistics show that approximately 95% to 98% of all kidnap attempts are successful and that over 80% of kidnaps for ransom last between 24 and 48 hours. Nearly all kidnaps have a demand for money – even political kidnappings. Furthermore, 85% of kidnappings take place on weekday mornings, while the victim is travelling in his car from his home to his office or school.

What is more, according to the firm’s global kidnap, ransom and extortion monitor, in the first two weeks of October, there were 93 reported cases of kidnap. South America – which has always held the record for the most kidnap attempts – was responsible for 32 cases, while India notched up 15 and Nigeria 11.

Security experts and insurers tend to agree that, with the exception of Iraq and Afghanistan, the most likely countries in which to be kidnapped are Nigeria, Algeria, Saudi Arabia, the Democratic Republic of Congo, and Mexico, where, according to Chubb Insurance Company of Europe, 4,500

kidnappings take place a year. Venezuela is also developing a bad reputation. In October an Italian-Venezuelan businessman was forced into a car by an armed gang in what is the 54th such incident in the state of Zulia so far this year: ten more than during the same period in 2006.

Of course, not all kidnappings occur in distant places. According to Metropolitan Police figures, there were 422 kidnaps and abductions in London in 2005, though the majority – but not all – involved separated mothers or fathers trying to see their children outside of visitation rights.

Modes of kidnap also vary. The most infamous are the cutting off of body parts to prove captivity, recently updated to removing organs to sell on the black market. An especially popular form of

kidnapping and extortion in South America is to abduct tourists or foreign businessmen and make them empty their accounts at an ATM machine. The victims are held overnight and are taken to another cash point the next day to withdraw the allotted amount of credit on the card. The victims are then usually released unharmed.

“Approximately 95% to 98% of all kidnap attempts are successful

This happened to an Irish couple on vacation in Lima in Peru. According to the male victim, the driver of the taxi he and his girlfriend had boarded drove down an alleyway and allowed five men armed with a gun and a knife to enter the vehicle. The perpetrators held the couple in a garage while forcing them to write down the PIN codes of their banking cards. They were released after five hours. The man stated that during this time the kidnappers repeatedly hit and threatened them.

There are also so-called ‘tiger kidnaps’ whereby bank employees or their families are held hostage until they can enter the bank and open the vault for thieves. One such incident took place on 3 October in the province of Nuoro on the island of Sardinia, Italy, when three armed men entered a bank director’s house and held him and his wife hostage for the night. On the morning of 4 October, the hostage-takers forced the man to withdraw €35,000 from a bank, at which point the couple were released.

According to research by Control Risks Group, recorded figures have shown that since 2003 there has been a yearly increase in this type of offence within the UK, culminating in a substantial 300% increase to 2006, with those businesses operating in the financial sector most at risk. Within Europe, figures released recently by Belgian law enforcement agencies indicate a 1500% increase in this type of offence with a substantial increase in the targeting of businesses within the banking sector (91%, 29 in 2006). The profile of tiger kidnap has been raised recently, thanks to the headline-grabbing losses incurred and dramatic nature of incidents such as the Northern Bank raid in 2004 in Northern Ireland and more recently the Securitas raid in Tonbridge, Kent in 2006.

Precautionary measures

However, not all kidnaps are so obvious. Motorists in Nigeria have complained recently of widespread extortion by police officers patrolling one of the capital Abuja’s main roads. According to the complaints, low-ranking police officers, often in civilian clothes, have stopped motorists for spurious offences and demanded money from them. On some occasions, motorists who refused to pay were held at a police station for some time to increase pressure on them. Similar incidents have been reported in Mexico, as well as eastern Europe.

According to Simon Jones, managing director at risk security services provider, Triton International, although it is true to say that in many areas, such as Mexico, middle-class locals are more at risk than foreigners, many firms still do not take the risks to expatriate workers seriously enough.

‘Kidnapping is a serious risk facing companies abroad, although thankfully a relatively remote one in most cases. However, the threat is still there. While managers are increasingly becoming more risk aware about other potentially damaging issues facing the business, they tend to neglect to think about the welfare and safety of their key assets – the people who work for them,’ says Jones.

Jones says that the number of reported kidnaps has almost doubled in the last decade. He estimates that about 40% of those are company employees, with around 25% being people targeted for their wealth; the remainder being those involved in family feuds or drug-related crime.

‘Companies should be considering not only taking out kidnap and ransom insurance policies, but they should also be thinking about putting all their staff – not just executives – based in an at-risk area on a hostile environment training course, so that they become more aware of the potential kidnapping risks around them,’ he says.

Insuring against kidnap

“The number of reported kidnaps has almost doubled in the last decade

Such sentiments are shared by other security advisers. ‘Risk management is such a key issue for companies now that it is bizarre that kidnap and ransom does not figure on the risk registers of even some of the leading multinationals that are heavily dependent on their operations in merging markets,’ says Justin King, managing director of C2i International. ‘I would estimate that fewer than one in ten UK companies working consistently in developing countries has even thought about taking out a kidnap and ransom insurance policy, let alone any security advice,’ he adds.

‘There are very basic tips that people should be taught before they go to work in high-risk areas,’ says King. ‘For example, any adviser will say the biggest factor in avoiding kidnap is lowering your profile and regularly changing your daily routine and route to work.’

Other tips include timing the approach to traffic lights so you do not have to halt, not stopping at accidents unless you are in an area with lots of people, and keeping enough space between vehicles so you are never sandwiched between two cars and cannot escape. People should also avoid travelling from airports in taxis that have not been arranged.

However, for most companies, insurance coverage is still the main choice, and London is still one of the key insurance markets for such risks.

In October, Hiscox, the world’s largest provider of specialist kidnap, detention and extortion insurance with a market share of 60% -70% by premium income, launched a combined insurance policy to protect companies against the individual or combined effects of war, terrorism and political violence. The all-in-one policy, tailored to individual business needs, can also include coverage for kidnap, ransom and extortion. Its policies provide standard insurance protection against kidnap, hijack and bodily injury.

Halcyon Ellis, vice president and European first party and kidnap and ransom manager at Chubb Insurance Company of Europe, believes that insurance can play a preventative role in mitigating kidnap and ransom risks.

‘More and more insurers are working with security consultants to offer hostile environment training courses to customers as a way of providing further assurance and also as a means to consider cutting premium prices,’ says Ellis.

Ellis also claims that the costs of such policies are far from prohibitive, with a basic 12-month company policy costing as little as $500 for ransom demand coverage of up to $1m.

‘The tools and expertise are readily available to help companies come to terms with these risks and the costs are not outlandish by any means.’