What is Kidnap and Ransom Insurance?

Kidnap and ransom insurance is a type of insurance that covers companies or individuals for all costs associated with extortion or kidnapping. In general, any ransom must be paid by the affected individuals when the situation arises, and then the money can be claimed back from the insurance provider. Kidnap and ransom insurance also covers injury and death resulting from kidnapping and ransom.

Kidnapping can occur when an important person is traveling in a high risk area and is chosen by a gang as a target. The individual will be kidnapped and held to ransom, which means that the kidnappers will ask for a certain amount of money in return for the victim’s release. This is when kidnap and ransom insurance comes into play. The only way to gain the safe return of the employee or family member is to pay the criminals the money. This basic extortion has given rise to the idea of kidnap and ransom insurance.

As with most insurance policies, kidnap and ransom insurance works on the principle of indemnity, which basically states that the insured should be reimbursed for any losses incurred. Most kidnap and ransom insurance policies will cover for any ransom costs, injury or disability to the captured individual, fees for crisis management experts and death. Some policies will also cover ransom payments that are lost in transit to the kidnappers.

Identified high-risk areas where kidnapping occurs include Latin America, Africa, Asia and the Middle East. Many of the affected countries are places that businesses must send employees. Some companies opt to get the insurance policy because it costs less than having to pay a ransom for an employee, should the situation arise.

Many different types of company could be targeted by kidnappers. Industries that are particularly at risk include financial, oil, gas, mining, telecommunications and pharmaceutics. Any upper-level employees working within these industries are regarded as worthwhile to kidnap because of their perceived financial superiority.

Although kidnap and ransom insurance can save companies in the long run, they still usually have to pay the costs themselves at first. The money is typically claimed from the insurance company after the event, which can still leave some companies in a very difficult situation. Even though the costs will be indemnified, the company will have to secure the funds to pay the ransom with no help initially.