Insurance for a growing multi-billion dollar industry...

Will the recent rise in kidnapping activity around the globe dent the aspirations of trans-national companies as they seek growth in emerging markets? A recent report by crisis assistance firm Red 24 suggests that kidnapping for ransom has become a multi-billion dollar global phenomenon and is happening more frequently and in more places. While many kidnappings go unreported for many reasons (including police corruption), the report suggest that there was a 9% increase in global kidnappings from 2010 to 2011. 

Kidnapping and extortion incidents occur for a variety of reasons. The motivation of a particular kidnapping group can be based on any number of reasons - from political or ideological motivators to pure greed. And, although the politically motivated kidnaps tend to gain the highest profile in the media, the most common reason for carrying out a kidnap is financial gain.

It is therefore important that every international company not only purchases a good quality Kidnap and Ransom (K&R) insurance policy, but also puts in place a full risk management programme that includes assessments of potential areas of exposure. Some insurers will offer a security review and planning as part of the cover. Every insurer will offer the expert services of response consultants in the event of an incident, who will provide both client and family support.

Despite the ability of firms to purchase K&R insurance, historically risky locations such as Columbia and Latin America are now being joined by Northern Africa, India and China and  it is the sudden expansion of kidnap for ransom activity into these perceived global "growth-economies" that gives most cause for concern. As with the more traditional asset and liability insurances, K&R insurance is a support mechanism and not a panacea for all ills - especially as the effects of a kidnapping situation will continue to have an impact on the individual and the business long after the event is resolved.

As such, this deteriorating global situation will no doubt force employers (and their employees) to rethink business travel risks and overseas postings. This in turn will impact negatively on the future rate of growth in these new economies and feed continued economic stagnation in mature markets - especially in the Eurozone - as global firms (rightly) become more risk adverse in terms of their employee exposures in these foreign markets.