Kidnap and ransom
Cover whose value depends on its secrecy, reimbursing a ransom paid and above all giving immediate access to a professional crisis-response team.
Since section 42 of the Counter-Terrorism and Security Act 2015, a UK insurer commits an offense if it reimburses a ransom it knows, or has reasonable cause to suspect, was paid to terrorists. UN Security Council Resolution 2133 of January 2014 had already called on states to shut those payments down, and French criminal law punishes terrorist financing under article 421-2-2 of the Penal Code. Kidnap and ransom (K&R) cover rests on that very act: the insurer reimburses after the fact, never pays the kidnapper and never deals with him. The peril runs wider than a classic abduction. Express kidnapping, where the victim is driven from one ATM to the next for a few hours, extortion under threat and wrongful detention by a state belong to the same family, and the last one puts the line squarely in political risk. The contract changes the risk it covers, since disclosing it raises the danger and can void it, so many protected people do not know they are insured. What the insured buys first is immediate access to negotiators, security consultants and legal counsel, whose first job is proof of life, because a share of demands come from opportunists holding nobody. On September 16, 2010, AQIM kidnapped seven people in Arlit, Niger, five of them French employees of Areva and Satom; the last four hostages were not freed until October 29, 2013. A crisis that long is what the policy funds, section by section: the ransom paid, its hijacking or loss while in transit, the fees of crisis-management consultants on call around the clock, medical and psychological costs for the victim and family, and the company's lost income during the incident. Some corporate travel policies add a kidnap and crisis section, narrower than a dedicated K&R policy. The line often gets mixed up with cyber extortion cover, which pays a ransomware demand; K&R policies are gradually adding that piece to the physical perils, but such a claim has no hostage and no proof of life. Concentrated in a single market, London, that pools its claims data, the line calibrates consistent offers from one case to the next and keeps kidnappers' prices stable instead of driving them up. The market claims a release rate above ninety-seven percent where the cover is in place.
Textbook case with numbers. The kidnappers ask for 1,500,000 dollars. The response team first demands proof of life, a question only the person taken can answer, since a share of demands come from opportunists holding nobody. It then holds an offer line pegged to the market's benchmarks, and the case settles on day 41 at 180,000 dollars, or 12% of the opening demand. The employer pays, then the insurer reimburses the 180,000 dollars plus the team's fees, 41 days at 3,000 dollars, or 123,000 dollars. Total reimbursed, 303,000 dollars. If anything links the kidnappers to a terrorist group, section 42 bars a UK insurer from reimbursing the ransom.
- Counter-Terrorism and Security Act 2015, section 42
- UN Security Council, resolution 2133 of 27 January 2014
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