January 12, 2013
The 20,000 kidnappings reported worldwide annually represents a growing risk for business with the economic woes in Europe likely to see incidents rise in countries such as Greece and Italy, Willis warned this week.
In its Resilience publication, the broker said the actual number of kidnaps is likely to be far higher than the official figures suggest as many go unreported.
In hotspot Mexico there were over 2,000 kidnaps reported last year, but according to the Council for Law and Human Rights, an NGO that works with families of victims, the true figure is around 18,000.
Earlier this year global security company Red24 noted that official data showed a 9% increase in kidnapping incidents between 2010 and 2011.
“The threat is growing, the risk is fluid and it can very easily move from one country to another,” said Richard Scurrell, Executive Director at Willis’ specialist kidnap-and-ransom division, Special Contingency Risks (SCR).
A number of factors are driving this increase, primarily inequalities in developing nations. “A lot of the countries where kidnaps occur regularly have a fantastically wealthy element of the population at the top, a very small middle class and a very large poor population,” explained Paul Mills, Executive Director of Security Services at SCR.
As the economic crisis in many parts of the world drags on, so more countries may match this profile, he continued.
Mexico, for example, saw a surge in kidnapping and extortion following the economic crash of 1994, and now Mr Mills fears the risk could return to European countries such as Greece or Italy, where it has not been a serious issue for decades.
“We have already seen incidents of high-net-worth individuals being attacked by more radical elements,” he said.
The growth in income inequality and increasing concentration of wealth in the hands of large multinational businesses is therefore a real issue for risk managers at big firms.
As Willis pointed out: “The latter’s workers make obvious targets for abduction; the former means a growing pool of potential perpetrators.” Kidnapping comes in various guises. Planned events, where perpetrators have watched their target and are well-organised, are distinct from opportunistic crimes, where the kidnapping is an afterthought to a robbery or carjacking.
The latter tend to result in lower ransom demands and shorter detentions, but also tend to be more unpredictable, meaning more danger for the victim.
Latin America continues to pioneer new methods, such as virtual kidnapping. In these instances kidnappers monitoring victims to learn their routines and perpetrators use this knowledge to extort money from families or employers by claiming to have kidnapped the victim when he or she is simply unreachable.
Whilst the majority of large companies in the developed world already have some form of kidnap and ransom coverage, said Mr Mills, many choose not to draw attention to such policies.
Coverage is often not disclosed to employees to stop them becoming targets. Employees can also commit fraud against companies.
“There have been various cases where individuals have apparently been kidnapped, only to be found later hiding out,” pointed out Mr Mills.
Willis argues that the kidnap and ransom coverage is ‘wide ranging’.
Policies usually cover not just the ransom (reimbursed, rather than paid directly by the insurer), but various other expenses involved such as travel costs, medical bills, rewards for informants and time away from work for those released-important considerations, given the length of time kidnapping cases can take to resolve, said the broker.
In addition to kidnapping, insurance also typically covers against extortion, wrongful detention and hijacking.
Added endorsements might include cover for loss of earnings, security costs in the case of threats, product losses as a result of extortion, and emergency repatriation.
Kidnap and ransom policies can also cover the costs of crisis-response consultants in the event of an incident. This is their real value, said Willis.
“The real value of these policies is in the resources that are brought to bear in the event of a kidnap,” said Mr Scurrell. “The overwhelming majority of multinational organisations can afford to pay a ransom, but they’re not likely to have the expertise and experience in-house to deal with a kidnapping.”
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