Kidnap and Ransom Insurance Explained

Kidnap and Ransom Insurance

Kidnapping for ransom can be an extremely profitable business and is, therefore, a chronic problem in many countries around the world. Indeed, the U.S. State Department began adding an indicator for kidnapping risk to their country-level travel advisories in 2019. If you or your employees frequently travel to high-risk countries and could be considered lucrative targets by kidnappers, kidnap and ransom insurance will offer essential protection from the costs associated with these incidents.

How Does It Work?

If a kidnapping has occurred, policyholders are required to immediately contact their insurance company. The insurer then typically assists with negotiating the ransom and delivering it to the kidnappers. The company will also facilitate the evacuation of the victim and provide them with any necessary care. However, as it’s an indemnity policy, K&R insurance doesn’t pay the ransom directly to the kidnappers. Instead, it’s paid out as a reimbursement to the relevant parties at later date.

What Does It Cover?

This insurance customarily covers the ransom payment, medical care and the loss of income suffered as a result of the kidnapping. If the money for the ransom isn’t readily available and a bank loan is secured, the insurer will cover any related interest payments. Some policies will also cover expenses such as crisis management and PR consultants.

The costs incurred by a kidnapping incident can reach hundreds of thousands and, occasionally, even millions of dollars. Thus, while K&R policies can be expensive, they offer vital protection for likely targets traveling to countries where the risk for kidnapping is high.