Ransom insurance is growing in Africa as resources gain importance
The world’s economic and political power is shifting from the developed world towards emerging markets. If you made the proposition that China would possibly be one of the world’s largest economies ten years ago, experts would have thought you are mad. Now the world is just waiting for when this is going to take place. It is no more a matter of if it is going to take place, but rather when this will happen.
The danger with expanding into these markets is that they are a haven for terrorists who kidnap key personnel for ransom purposes. This is particularly true in Africa where there have been high profile instances of kidnapping.
Africa is seeing a second wave of investment off the back of significant oil and gas discoveries on the eastern coast of Africa. But with investment in developing markets comes significant challenges, and investing in kidnap and ransom insurance is fast becoming a prerequisite when expanding into Africa.
A country without borders
We have seen the recent disturbances in Nigeria which is being led by the radical Islamic group Boko Haram. And while many will be quick to point out that this is isolated to West Africa, we must bear in mind that the political situation in Eastern Africa is only starting to settle down.
Dani Ettridge of Aon South Africa points out that there is estimated to be between 15 000 and 20 000 kidnap for ransom and extortion incidents every year, but the reality is that many more go unreported. For this reason, it makes it difficult to confirm whether such incidents are on the rise. "However, recent events in Nigeria and Yemen have refocused global attention on what is a terrifying, often terrorist-linked practice of raising funds for arms or political gain. Many more incidents abound throughout the world, but by far the more booming emerging markets are proving to be high risk areas for travelling business people,” explains Ettridge.
Business travel to Africa will be on the increase and there will be a significant investment infrastructure programmes as many markets in East Africa are not adapted for global trade. These will become prime targets for terrorist activities.
Looking local
These activities puts high profile people in potentially risky situations on a frequent basis, and while there is the perception that this will be limited to areas of conflict, it is no longer a case of these incidents being isolated to specific areas.
"Kidnap patterns in Africa particularly show that expats from international companies and the personnel of international aid organisations are likely victims due to the high profile and perceived wealth of the company they work for. But even the South African environment, with its perceived low levels of law enforcement, is conducive to the kidnapping professionals. Something of a kidnapping culture is already well entrenched in the country, albeit mostly without the associated extortion part. Thus any business with travelling staff needs to be versed in the risks and preventative measures to be taken,” explains Ettridge.
Hitting home
The impact of a kidnap can be enormous, and it is often the human tragedy that hits home the most. Many will remember the incident involving Madeleine McCann in 2007, which is still unresolved.
Ettridge explains that it is extremely traumatic for those involved and dealing with an incident which can lead to significant losses from ransom payments, business interruption, litigation, adverse publicity and long-term damage to reputation. Every company with cross-border operations should consider protecting themselves and their staff against the risk of kidnap, extortion, detention and hijack. Due to the massive sensitivity of such risks, confidentiality is an utmost priority and it is also a firm condition of Kidnap for Ransom and Extortion (KRE) policies that the existence of the policy cannot be revealed to a third party or all employees.
"KRE is a reimbursive insurance policy, which means the insurance company will reimburse a policyholder after a ransom is paid. While KRE insurance provides the financial security that any ransom paid will be reimbursed, the real value behind having KRE insurance is not the money. KRE insurance policies provides unlimited access to a professional and experienced crisis response team to assist in dealing with a covered event. Specialist response consultants who are highly trained and qualified to manage such a crisis are invaluable, as is the advice and support to the victim's family throughout such a traumatic incident,” says Ettridge.
Never the same
Each kidnap and ransom situation is unique, and therefore each KRE policy is also unique in nature. It is up to the broker to illustrate this to clients and to make sure that they understand the risks involved in taking out a KRE policy.
"Policies have had to evolve and adapt to changing conditions and environments since their introduction some 20 years ago. Insurers have added on various extensions that adapt to the evolving elements of personal accident and injury involved with this crime. The reality is that kidnap victims can at times be held for months or even years which means that the company would need to consider salary replacements for the time that the executive is not there, as well as consider possible loss of earnings for the company or the family. An event such as kidnapping could also trigger certain business interruption concerns and there is also an emerging risk of potential emergency political evacuation of employees that a company could be required to carry out,” concludes Ettridge.
Editor's Thoughts:
The nature of insurance is to protect the assets of the individual in the event that an unforeseen event occurs. For executives travelling into Africa, KRE is a necessary purchase as one can never predict when an event such as this will occur. And if it does, the company wants the peace of mind that their employee and the employee's family will survive the ordeal.Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments