Out of the Shadows: The K&R Industry

14 September 2018

The once-clandestine Kidnap and Ransom (K&R) Insurance market is now undergoing a long-overdue transition to transparency and expanded coverage.

Born in Latin America (Colombia and Mexico) the product was developed to protect high net worth individuals, journalists, politicians and their families against the ever-present risk of abduction for financial concession by criminals and by politically-motivated organisations. Now a multimillion-dollar insurance market, this secretive industry finds itself emerging from the fog of confidentiality.

The K&R insurance industry offers tailor-made programs which now cover a vast suite of insured perils such as kidnap, mysterious disappearance, threat, extortion and emergency evacuation. Owing to the notable increase in insured perils, the product traditionally known as “Kidnap and Ransom” is now more widely referred to as “Security Risks Insurance” to better reflect the broad cover provided.

Spanning the last 3 decades, this insurance product has evolved to meet emerging threats. It has assisted clients in responding to events perpetrated by the IRA and Al Qaeda. In more recent times, it has adapted to the seemingly ever-present risk of religious fundamentalism, people-focused terrorism, cyber extortion and the well-publicised kidnappings of journalists in the Middle East by the so-called Islamic State of Iraq and the Levant. Security Risks insurance programs are also designed to protect companies and families against the less “exotic” risks that they face in doing business on a corporate level day to day. Examples of such risks include salary or business disputes.

From its origins in Latin America, the K&R industry and JLT’s Security Risks team have grown to service a worldwide clientele from almost every industry type. Those who buy this coverage are typically, but not exclusively, in the oil and gas industry, mining, media, charities and NGOs, construction, financial institutions, academic institutions, resorts, high net worth families and VIPs. In 2008, JLT added maritime clients to our portfolio to respond to the piracy “epidemic” which presented itself off the coast of Somalia and has since spread to almost every corner of the Indian Ocean. While the Indian Ocean problem has calmed somewhat, piracy continues unabated off the West Coast of Africa. More recently, Southeast Asia has emerged as a piracy hot spot, including the Malacca Straits and the Sulu Archipelago.

With such a dynamic risk landscape, the K&R industry has adapted due to necessity. Products now include a suite of people-focused insured perils which sit within 5 key columns: criminal risks, political violence, political risks, terrorism and information risks (including cyber breaches). These bespoke programs are a unique blend of insurance and crisis management, including the all-important financial protection. The programs give clients access to world-class crisis responders through a 24/7 hotline. These experts provide the client with unlimited support, assistance and handholding from the moment an incident occurs until the safe and timely resolution of the emergency. Many of JLT’s clients have the financial capability to handle an incident but do not have the expertise to navigate a missing person scenario, wrongful detention or whistle-blower case that is spiralling out of control. Therefore, it is often the 24/7 access to these experts that provides our clients with the peace of mind they need. This also allows risk managers, HR managers and board directors to ensure they are ticking their duty of care boxes.

JLT is proud to manage one of the largest portfolios of clients in Asia. Over the last 5 years or so, Asia has experienced a variety of new security exposures which have prompted risk managers to increasingly enquire about this class of insurance. In recent times, elevated tensions on the Korean Peninsula and a series of tragic earthquakes in Indonesia have reminded our clients of the value of their access to emergency evacuation expertise and crisis management advice. In Sabah, eastern Malaysia and the Southern Philippines, our clients are protecting their personnel against the risk of abduction by organised criminals and terrorist organisations. In China and Southeast Asia, our clients rely on this product to assist in the resolution of business disputes, threats and extortions.

In the JLT Security Risks team, we constantly ask ourselves “what is next?”. Be it the increased risk of religious and politically-motivated violence across Asia or a continued spate of natural disasters in the region, we are confident that we have a solution or advice for every complex crisis that our clients may face.

This article has briefly covered the K&R industry and its value to clients. Over the next 3 articles, we will explore how the broad Security Risks coverage, Maritime Piracy programs and Emergency Evacuation policies can be relevant to your business in the increasingly risky but promising region of Asia.

For more information, please contact Lucy Bradshaw at Lucy_Bradshaw@jltgroup.com