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Survey Report

Insurance Marketplace Realities 2019 — Special contingency risks: kidnap and ransom

Credit, Political Risk and Terrorism
Geopolitical Risk

November 6, 2018

The special risks insurance markets continue to reduce their exposure to cyber extortion events.

Rate prediction

  Trend Range
Special contingency risks: kidnap and ransom No change or slightly up/down –5% to +5%

Key takeaway

The special risks insurance markets continue to reduce their exposure to cyber extortion events. All markets have now introduced a sub-limit for cyber extortion business interruption, and most markets are looking to restrict overall policy coverage to reimbursement of ransom, crisis consultancy fees and expenses and limited special expenses such as public relations.

Interest in active shooter/assault coverage is growing.

  • Kidnap and ransom (K&R) markets as well as markets underwriting crisis management lines have shown increased interest in active shooter/assault coverage and begun offering customized solutions (either via endorsement or stand-alone) with a focus on post-incident crisis management support, legal liability, business interruption (both physical and non-physical damage) and indemnification of a variety of expenses.
  • The solutions go beyond traditional terrorism or political violence coverage and we are seeing (and developing) products with the ability to complement existing terrorism placements.

M&A activity among carriers has had little impact on K&R lines.

  • Carriers merging in recent transactions have not brought together K&R markets, minimizing the impact in this space.

The main drivers of kidnap are the continued decline of security and rule of law across numerous countries.

Latin America

  • Mexico remains the most dangerous country in the world for kidnapping, with the country’s central and northern states continuing to have the highest kidnapping rates.
  • The deterioration of the economic and political situations in Brazil and Venezuela will likely drive an increase in express kidnappings and extortions.
  • Colombia poses a moderate threat of kidnapping as guerrillas, insurgents and paramilitaries continue to operate in the country’s hinterlands.

Middle East and North Africa

  • Libya’s political framework remains unstable, with militias controlling several parts of the country, ensuring a high level of risk to expatriates and locals.
  • Security in Mali’s northern and central regions remains poor, with several criminal and jihadist organisations, including al-Qaeda-affiliated groups, operating with increasing impunity.
  • Yemen and Syria’s ongoing conflicts will continue to pose very high levels of kidnap threat.
  • In Iraq, criminal gangs and Islamic State Group cells continue to operate in disputed areas, kidnapping Iraqi locals, officials and foreign nationals.

Sub-Saharan Africa

  • In Nigeria, staff from mining, oil and development sectors face a rise in kidnap activity from insurgents, specifically in Borneo, Kaduna and Delta states.
  • The Democratic Republic of Congo, Somalia and South Sudan are the countries of highest danger.

South Asia

  • Kidnap for ransom is growing in Pakistan (particularly for foreign nationals of Pakistani origin) with the most recent cases in Punjab and Baluchistan states.
  • In Afghanistan, the Taliban continue to be the main threat to foreigners and locals.
  • In India, the abduction of wealthy business people’s family members will continue to be a moderate threat.

South East and East Asia

  • In the southern Philippines, specifically central and western Mindanao and the Sulu archipelago, the risk of kidnap of foreigners by the jihadist militant and piracy group, Abu Sayyaf, will remain a high risk.
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