The demand for kidnap and ransom insurance increased following a January terrorist attack on a gas plant in Algeria, said Jeremy Lang, senior vice president and manager of U.S. kidnap and ransom insurance for Hiscox Ltd.
Three Americans were among 37 foreign workers killed in the four-day siege of the plant. Islamic terrorists used hostages as human shields when their attempted mass kidnapping went awry, U.S. state department said. Five Americans were among the 792 hostages that escaped or were rescued by Algerian special forces.
Kidnap and ransom insurance "absolutely" played a role in saving lives in the incident, Lang said, although he could not go into detail.
The incident caught the attention of a lot of people, he said.
"We are finally at a point where there is not a single type of industry that hasn't asked about a K&R policy," Lang said. "Everybody from nongovernmental organizations to hospitals and schools and not just universities, but K-12 schools houses of worship, families...the world is a dangerous place, and folks need to know when they are planning their travels that they have this 'sleep at night' insurance."
Insurance buyers were aware of many perceived "hot spots" in the world, but "Algeria didn't come up on their list of the top 10," Lang said. "It got a lot of people to think: 'what else are we not thinking about?' Maybe we need a policy in case something goes wrong."
K&R insurance usually includes an emergency response firm that is called when the insured is in danger, whether due to a realized or potential threat. For instance, the "Arab Spring," triggered a number of calls as companies sought to get their employees out of the way of potentially violent uprisings.
"You want to know that no matter where you are in the world, you can pick up the phone and call someone and that someone will have a solution to your problem," Lang said.
He said it's key that the response firms have vast experience, are able to speak the local language and know the local culture, plus know the lay of the land, both physically and politically. For instance, in some cases, an insured might not want to leave the country in turmoil altogether, but get relocated to safer area in the same country. Or sometimes, the first priority would be to get the insured over the border, then transport them home.
In the case of an actual kidnapping, the response firm steps in and works with the insured to resolve the situation, including potentially negotiating a ransom demand. The insurance company is not involved in the decisions being made during a crisis, but can reimburse the insured if a ransom ends up being paid, he said.
Premiums for the coverage are based on the type of insured and where they are traveling to, Lang said. Premiums range from $1,000 up to hundreds of thousands of dollars.
"Someone traveling to Western Europe, Canada and London would have a very different premium than someone operating in the Middle East or Nigeria or Latin America," he said. "But a lot of policies are sold for less than $5,000."
In October, Lang said the economic recession and financial uncertainty might lead some to believe that spending on K&R coverage should be cut, but the opposite was true. "When you have companies that need to do business in a number of markets, and the growing split in many countries between haves and have-nots, it creates an environment that opens itself up to crime," he said.