Heightened Insecurity

Terror threats inspire renewed interest in kidnap for ransom insurance.

June 01, 2013 Photo

Current events in North Africa and West Africa have brought into sharp focus the risks facing companies that operate in politically fragile parts of the world. Meanwhile, the spread of Islamic terrorism in the Sahel—a semiarid transitional band extending from Senegal eastward to Sudan—poses a profound threat to people and businesses across the region.

Kidnap Risks in Africa

“The seeds of dissent sown by al-Qaida and its franchises continue to foment violence globally and have the potential to converge across the Sahel,” says Tim Holt, head of intelligence for Alert: 24, a new crisis and risk management consultancy from Special Contingency Risks (SCR). “This poses a serious threat to security and stability in the Sahel as the risk of attack and kidnap for ransom is extreme. Affiliated organizations in the Sahel are reported to have raised more than $1 million in ransoms.”

The U.N.-sanctioned French military action in Mali has provoked retaliation and presented opportunities for jihadists and criminals. The taking of hostages by Ansaru in the Nigerian state of Bauchi and a family of seven French nationals in neighboring Cameroon by Boko Haram and the In Amenas hostage situation in Algeria all indicate the severity of the kidnap risk for companies operating in the Sahel.

The main groups operating in the region are al-Qaida in the Islamic Maghreb (AQIM), Al Shabaab in Somalia and Northern Kenya and Boko Haram and Ansaru in northern Nigeria. The combination of an influx of weapons and mercenaries from Libya following the fall of Moammar Gadhafi’s regime in 2011 and a large number of unemployed young men with military experience serves only to increase the political instability and the risk of kidnap in the region.

Unsurprisingly, the key targets remain foreign nationals operating throughout the region. While these groups are fundamentally motivated by an Islamic extremist mindset, their attacks on foreign nationals are both politically and financially motivated. Kidnap for ransom is increasingly viewed as an accepted fundraising mechanism. Negotiations involving foreign victims may include an amalgam of diverse demands frequently directed at the government of the victim.

Upswing in Nigeria

In Nigeria, a country that has consistently ranked either first or second in global kidnap threat hotspots, there has been an upsurge in political and security concerns. These are reflected in two key developments. Primarily, the kidnapping of seven foreign nationals by Ansaru, an Islamic break-off group of Boko Haram, from a construction camp in the Bauchi state on February 16, 2013. According to Holt, this marks a change in strategy for the Islamic groups operating in the north and northeastern parts of Nigeria.

Previously, Islamic extremists in Nigeria mainly attacked symbols of state power, such as police stations, with the single exception of the 2011 bombing of the U.N. headquarters in Abuja. However, increasing ties between Ansaru and AQIM, which promotes the spread of jihadist violence in the Sahel, could signal that kidnap for ransom or political hostage taking (particularly of French nationals) is becoming an acceptable practice.

The increased activity of Boko Haram in Mali combined with cooperation between Ansaru and AQIM may indicate a greater cohesion between Islamic militants across national boundaries in the region. Holt believes that there is also a risk of criminal groups adopting the jihadist “brand” in order to carry out kidnap for ransom for financial rather than political gains. This marks a worrying trend in the region.

Secondly, the Movement for the Emancipation of the Niger Delta (MEND) continues to represent a major threat to the oil industry. Despite some success during the amnesty in 2009, MEND’s political agenda is re-emerging with considerable violence seen in regular attacks on oil infrastructure and regular kidnappings of oil workers in Delta states. These events signal a downturn in the security prospects for multinational companies working in Nigeria, especially for compounds and installations where foreigners are working or housed. These are areas known to be deliberately targeted by militants, criminals, and pirates.

Risk Mitigation Measures

These heightened exposures in North and West Africa should encourage corporate and private individuals who travel or reside in the region to consider the need for adequate risk mitigation measures.

A kidnap for ransom insurance policy, for example, is designed with the insured’s protection in mind. A good policy caters to a range of security needs. It also refunds ransoms paid in the event of a kidnap and indemnifies against a range of expenses incurred in the event of extortion, hijack, or detention. Expenses usually also include fees for specialist response consultants who are equipped to advise and support the client in the event of an incident. Response consultants are typically able to be with a client within 24 hours of receiving a call.

These policies typically also protect individuals against personal accidents suffered as a result of a kidnap, the cost of travel and accommodations incurred by the victim and their family during the incident, and the rest and rehabilitation of the victim and their family.

A range of extensions are available to satisfy specific security requirements. These include a repatriation and relocation extension, for events similar to the Arab Spring where a large number of employees have to be evacuated from one country, and disappearance investigation, which permits response consultants to start investigating an insured’s disappearance 48 hours after the person has gone missing. But not when a ransom demand is made.

Extensions are available also for express kidnapping. Express kidnappings are usually short and involve a person being held at gunpoint while large amounts of money are extracted from their bank account via ATM or their house is ransacked. These are particularly common in Nigeria.

Insurance Disclosure

Underwriters that offer these types of protection typically request detailed information, such as the number of employees that a company has in the region, the locations in which these employees are based and will travel to, whether there have been any previous threats or incidents, and the nature of the business in which the insured is involved.

If a buyer is traveling to particularly high-risk countries—namely those falling within the top 20 kidnap hotspots (Mexico is currently ranked number one)—underwriters will usually request further security information. For example, if a client travels to Nigeria, underwriters usually require them to disclose what security measures they have in place, the accommodations where they will be staying, where they will be traveling to, and how they intend to travel around the country. This enables the underwriter to better understand the risk and price policies accordingly.

Kidnap and ransom policies are normally bought by families in countries where there is a high risk of kidnap, in order to ensure the well-being of their loved ones. Corporate clients often purchase this insurance as a consequence of their duty of care towards employees who travel and live in these destinations.

Taking the appropriate risk management measures also makes very good business sense. The bad publicity following a poorly handled kidnap case can adversely impact a company’s corporate image. The repercussions have been known to affect consumer and shareholder confidence and have the potential to create a general unwillingness to engage in business with the company. For this reason, the fees of an independent public relations consultant are typically included in corporate kidnap policies.

The deteriorating security situation in North Africa and the prospects for multinational companies working in or sailing nearby this part of the world indicate the need for organizations to re-evaluate and act upon their threat exposures.

About The Authors
Sarah Gerken

Sarah Gerken is broking director for Special Contingency Risks (SCR), part of the Willis Group.  

Sponsored Content
Daily Claims News
  Powered by Claims Pages
About The Community

CLM’s Cyber, Management & Professional Liability Community helps raise awareness of issues and trends in the management & professional liability insurance marketplace, with an emphasis on litigation management through a collaborative effort between insurance companies and brokerages, claims organizations and service providers.

Community Events
No community events