Research

Marketplace Realities 2018: Kidnap and ransom (SCR)

November 6, 2017

    The one thing

    Assault/workplace violence continues to be a growing concern and the market responds by openly offering coverage.
  • Buyers with relatively unchanged exposures can expect flat renewal premiums with three- year policy terms. Exposure to highly sanctioned countries (i.e., Iran, Syria, etc.) will bring enhanced scrutiny as insurers ensure compliance with applicable laws and regulations.
  • Assault/workplace violence coverage is openly available via policy extensions. A stand- alone insurance market has developed, providing greater capacity in limits of liability and broader coverage. Demand for coverage is increasing due to increased focus on business interruption and legal liability.
  • The market is moving to limit coverage for cyber-related extortion. This includes restrictive language concerning “other insurance,” decreased limits of liability for business interruption and aggregate limits for cyber extortion events.
  • Latin America. Increasing insecurity, economic instability and the weak rule of law are the main drivers of kidnap for ransom — this is most apparent in Mexico. An upsurge in violence continues, yielding greater kidnap threats, particularly in the states of Sinaloa, Chihuahua and Tamaulipas. The violence seems to be driven by the fragmentation of previously hegemonic criminal groups following the extradition of drug lord Joaquin ‘El Chapo’ Guzman to the U.S., leading to a diversification in crime.
  • Price prediction

    -5% to +5%
    • The political and economic crisis in Venezuela will continue to drive kidnapping rates, as will economic troubles in Brazil.
    • Colombia’s security environment will continue to improve, most notably with the rebel group ELN announcing a ceasefire. Advancements in their talks with the government will further decrease kidnap risks in the country. However, opposition to the peace deal and presidential elections could lead to increased political violence.
  • Middle East and North Africa. Conflict across the region will continue to be the main source of kidnaps in 2017. Kidnap rates will likely decrease as the Syrian government, aided by Russia, attempts to maintain control over recently won territory.
    • In Libya, rival factions and armed militias continue to struggle for power. Kidnap will likely continue to be a significant source of funding for groups seeking to control territory.
  • Africa. Nigeria continues to suffer from high levels of kidnap due to economic instability, inequality and opposition to resource extraction projects. As previously predicted, kidnap rates have remained high and the risk is notable for both nationals and foreign staff. The Sahel and countries such as Mali, Mauritania and Niger will continue to face kidnap risks, driven by militant Islamist groups such as al-Qaeda in the Islamic Maghreb (AQIM). Recent attacks in Burkina Faso demonstrate the ongoing presence of such groups.
  • South Asia. Pakistan, Afghanistan and India remain the highest risk locations. The major kidnap risk in the region will likely continue to be that posed by criminal groups. There is concern that criminal kidnap groups will sell their victims to organizations such as the Taliban in Afghanistan.
  • Southeast Asia. The militant Islamist Abu Sayyaf Group (ASG) poses the greatest kidnap threat in Southeast Asia. The battle for Marawi in the southern Philippines demonstrates the strength of Islamist groups in the region. Piracy will continue in the southern Philippines and the Sulu Sea as far out as Malaysia’s eastern Sabah province. It is likely that the trend of piracy for kidnap will continue through to 2018 as the more radical elements of ASG seek funds and attention in their fight against the Philippine government.