It's been a while since we've even touched on the subject of Kidnap and Ransom insurance, and that was primarily as it relates to piracy. But as our world has gotten more dangerous (and smaller), it may be worth a quick lesson in how this kind of coverage works. And thanks to the folks at Global Underwriters (nationally recognized experts in this special risks area), we can offer a primer.

First, this type of insurance is actually comprised of several distinct but interrelated risks:

The most obvious, of course, would be Kidnap and Ransom. The covered event "is the abduction and holding of a covered person by someone who is demanding a ransom in exchange for the release of the captive person."

The coverage ostensibly covers the ransom payment itself.

"Ostensibly," Henry?

Peter Schulteis, Executive Vice President  of Global Underwriters, pointed out that it's illegal to insure an actual crime, so carriers have figured out an administrative solution to legally reimburse the actual payment.

There's a related covered peril called Express Kidnapping, which "covered event is a kidnapping where the duration of confinement is less than 24 hours." This was less obvious to me, and I asked Peter for an example: imagine that you've flown over to Merry Olde England for a long weekend of Wimbledon watching, and some bloke sticks a shiv in your ribs, demanding that you hie to the nearest ATM and hand over some cash. That's the kind of thing that this piece covers.

Next is Hijacking, which is defined, conveniently enough, as "the illegal holding under duress of an insured while on board any form of transportation by people who demand a ransom in exchange for release." This is basically an enhancement to the underlying kidnapping coverage.

Detention is "an arbitrary and capricious act of involuntary confinement of a covered person." An example might be the young mother currently hiding out in the American embassy in the Sudan: while traveling, your papers are found "not to be in order," so we'll hold you until you pay up.

And finally, we have Extortion ("when there is receipt of a threat to cause bodily harm or property damage by persons who demand a ransom to not carry out the threat"). Peter offered the fascinating story of how, a few years ago, Chiquita (of yellow fruit fame) was approached by hoodlums who threatened to kill the company's Ecuadoran employees, bit would refrain from doing so for a monthly "fee."

A truly amazing - and scary, really - look into an area of insurance which doesn't get a lot of attention (and maybe that's a good thing).

Thanks, Peter!
 
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