Kidnap insurance addresses a growing need

Names like Charles Lindbergh and John Paul Getty sadly made the word “kidnapping” a household word. Getty’s grandson was kidnapped and gave up an ear to convince his wealthy grandfather who then handed over just under $3 million to get the younger Getty released. The Lindberghs had a more tragic ending, giving their son’s kidnapper $50,000 only to discover their son had died shortly after he had been taken.

Since then, kidnappings have become much more frequent with about 20,000 reported kidnappings around the world each year.

Mark Baker of Ontario-based Special Risk Insurance Managers Inc. told the Independent Financial Brokers of Canada’s (IFB) conference in November that only 20% of all kidnappings are reported, meaning there are an estimated 50,000 kidnappings worldwide a year.

In just the past year or so, Special Risk has partnered with London, England-based insurance CFC to underwrite just over US$500,000 in premiums for kidnap insurance. 

Half of kidnappings take place in the Americas. The Middle East reports about 5% of all kidnappings, most of which are politically motivated, said Baker.

About 80% of kidnappings are resolved through discussions and the person is released. “This proves that negotiations are by far the safest approach. [But] fewer than 5% of all kidnappings are insured.”

Baker said there are times when the entire negotiation process can take weeks or even months, which can get costly – and nerve-racking. The insurance covers the ransom itself, but also brings in seasoned professionals to deal with the negotiations. As soon as it is determined that the kidnapping is real and not a hoax, the insurance company deploys a specialist who will determine which member of the family or company is the best contact person to talk with the kidnappers. Together they develop a strategy to get the kidnapped person back safely.

Baker said the CFC insurance is only available corporately for Canadians, and is often take out for those who work in fields such as engineering, mining and non-profit groups.

How much insurance is placed on a person and how much the kidnappers actually receive after negotiation is not made public, said Baker.