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Specialty Podcast: Exploring Kidnap and Ransom Insurance

By Alliant Specialty

Tim Crowley, Alliant Management & Professional Solutions, welcomes Chris Arehart, Chubb, to discuss the value of kidnap and ransom (K&R) insurance products, addressing risks and vulnerabilities for businesses of all types, including international considerations. They highlight how K&R safeguards companies and individuals from financial impacts and harm resulting from kidnapping, extortion and detention events and explore lessons from real-world incidents.

This podcast is jointly owned by Alliant Insurance Services and Chubb. Permission is granted to download, copy, distribute, share and publicly perform this podcast in its original form. Modification of the podcast is prohibited without the prior written permission of both Alliant and Chubb.


Intro (00:00):
You are listening to the Alliant Specialty Podcast, dedicated to insurance and risk management solutions and trends shaping the market today.

Tim Crowley (00:09):
Hello everyone. Welcome back to the Alliant Specialty Podcast Network. Today I am your host, Tim Crowley, from Alliant's Management Professional Solutions Group. I'm a senior vice president focusing on all things management, professional liability, and their insurance products. Today I'll be joined by Chris Arehart, senior vice president and first party product manager within Chubb's North America Financial Lines department. In this podcast, we'll be talking about the value of kidnap and ransom insurance products, the risks and exposures facing the full universe of companies, both domestically and foreign, and all industry classes there within. We will then discuss some lessons learned from previous incidents and how you can be prepared for your business, and more importantly, people to mitigate such risks and drive the best outcomes. To begin, kidnap and ransom insurance, also known as K&R, is a specialty crime insurance product that protects both companies and their people from the financial impact and harm arising out of kidnapping, extortion and detention events.

While these specialized insurance products do afford financial reimbursement in response to ransom and other costs, perhaps more importantly, this risk management tool also provides access to third-party resources to help clients navigate and negotiate more favorable outcomes in the event of a kidnapping or extortion event. Lastly, many clients initially think of C-suite level employees who travel abroad as being the most at risk of a kidnapping. However, in today's environment, we are experiencing an increased volume of threats of lower demand and/or lower-level employees being involved in such events. So let's get started; get prepared to be prepared. So Chris, thanks for joining us today. I think we should start with just a brief overview. What are the first steps that clients should be taking when evaluating their exposure to kidnap and ransom threats?

Chris Arehart (01:50):
Well, Tim, thanks for having me on the podcast. It's an honor to be here and appreciate the support you have with Chubb and with your clients and partners regarding kidnap and ransom. The best thing that a company can do is recognize that their people, their employees, their family members, etc., are their most important and valuable asset. And I think everyone would agree that when they think about their company, it's not about the things that they make or the services they provide, but it's the people that come to work every day. And in doing so, companies evaluate where those people are around the world. Are you a domestic company with only employees here, but you still have risk? Do you have internationally located employees in other countries and other regions? Those individuals have a different type of risk and a different level of risk. Then do those employees have family members? Do they have people that are connected to them? That evaluation of your employee risk is the first step in looking at your risk for kidnap ransom and exposure.

Tim Crowley (02:54):
Great, that makes sense. So, looking forward, should companies of all shapes and sizes be concerned about kidnap and ransom threats, or is this a risk only for certain companies or certain domiciled companies or certain industry classes? What are your thoughts on that?

Chris Arehart (03:07):
Well, our understanding of kidnap exposure is that all companies have this risk everywhere in the world. I don't think there is a location on the planet other than maybe Antarctica that doesn't have a risk exposure to threats, violence, kidnapping, extortion, because at its core, all companies have employees, all companies have that exposure to a person either being taken or an extortion risk associated with what you do. Let me give an example: a small company in the United States, they're an import-export company, and this is a real matter that I've handled in my past, but I'm going to change all of the names and whatnot to protect the innocent. This is a real company and they're an import-export company and they're located on the West Coast of the United States. They regularly interact with the Far East to import products, bring in products, and then resell them. There's a trade dispute; there's a bill that needs to be paid.

There is a situation where both sides are getting more and more agitated. Ultimately, the CFO of the company flies over to the Far East to meet with the supplier and try to negotiate the settlement of this payment of this bill. Upon reaching the location, he's immediately arrested, taken by the local police and threatened with his life if he didn't pay the bill to the Far East supplier. And, held against his will, wrongfully detained is what we call that wrongful detention. He now is stuck in that location, doesn't have a lawyer, doesn't have access to the resources that you would have here in the United States, and ultimately calls home and says, I am being held and we need to make this payment. This company has no locations abroad and this is the first time that they've ever gone outside the United States. So that individual now has a problem.

How do they negotiate through with this company who is not interested in speaking with lawyers, not interested in speaking with anybody other than someone who has a checkbook, who's going to write a check that they feel that they deserve? The solution to that is found in solid risk management in the partnering of professionals that can help intervene, negotiate, and extract that individual from that location out of harm's way back to the United States, and that's exactly what occurred. Phone calls are made. Professional negotiators Chubb uses and has partnered with, a group called the Ackerman Group for 45 years. And the Ackerman Group is staffed with professionals that have made it their life's mission and work to bring people home safely and securely. Former CIA officers, former NYPD terrorism officers, former FBI officers, all with years and years of experience of how to negotiate with a terrorist or negotiating with a kidnapper or an extortionist with their sole purpose of bringing that person home under whatever means necessary. It's not really do-it-yourself work, and that's where the company that is looking at its risk has to come to grips with the idea that they're not going to be able to do this alone. They need help. And insurance, that's what we bring; we bring help partnered with professionals and risk management solutions to help that company who doesn't have the resources on their own to be able to negotiate and to bring home that family member safely.

Tim Crowley (06:34):
Great, thanks Chris. It's certainly a helpful story for the listeners today trying to get their hands around how even domestic risk could be at an exposure for kidnaps abroad or other threats. So let's say a client and a customer, they've now made the decision that, alright I have this exposure. Maybe I didn't realize that or think about that previously. So, once they establish that position, what is the next best step for that company to take?

Chris Arehart (06:58):
That's a great point. They should speak with an insurance professional and partner with professionals that can bring that risk response to bear on their company. Building a crisis management plan with a professional staff. Even the largest companies on the globe do not have the internal resources and knowledge and experience to be able to negotiate with a kidnapper, a hostage shaker, an extortionist or other threat actor. In reality, there's only maybe a handful, a couple dozen at the most globally that have ever actually negotiated or set the stage for a negotiation with a kidnapper. That's a small universe of people with experience. You can't be expected to have those people on staff. It's like having that commercial, the cell phone commercial with the guy with the network behind him saying, these are the people behind you. That's what you want, you are the company, but then you have resources of the best people in the world to call upon 24 hours a day, seven days a week.

It doesn't matter what time when you call that number, the Ackerman Group operative will pick up the phone and be able to begin negotiating if that's necessary. What's most likely going to occur is they're going to take the information, partner with your crisis management group whom you've built. You've taken that step to build a crisis management team. That crisis management team then knows how to contact the Ackerman Group, talk with the risk responder, and then begin the situation and mitigating the situation, the threat or whatever the situation may be. Their step needs to be working and finding the professionals that they are comfortable with. Most carriers don't have an unlimited number of firms that they'll work with. In fact, the interesting aspect of kidnap ransom is that this is a policy that can work for you every day, but you hope you never actually have to use. Tim, do you know of another insurance that's like that where you have access to this service, you have access to these things and you're using your insurance, but you never file a claim?

Tim Crowley (09:07):
It's a good point and it's interesting, right? In today's cyber products, there are some resources and benefits and such, or even employment practices. Sometimes they have some loss preventative components of the policies. But this is definitely unique and has been around in a longer timeframe than those. But it's a great point.

Chris Arehart (09:23):
We've been writing kidnap ransom insurance for 45 years and from the moment we entered this business, we've partnered with the Ackerman Group, being founded on these principles of bringing people home. When we built the product and we were one of the first entrants into this business domestically of Lloyd's of London, and you have us entering in 1978, we entered because we felt that we could manage the risk through loss mitigation and risk management and proper negotiation. You can't write this coverage without having a partner that can actually negotiate a person. You can write words in a policy, but if you can't meet those words with, here is the help you need at the moment, you need it in time. So, the companies that have those partnerships and Chubb is one of them, are able to provide those services to the companies and they can use it at any time. I am out on the road constantly and my mantra, you mentioned it before, I want to thank you for that, is get prepared to be prepared for the unexpected. You don't expect that a threat, a kidnapping, a wrongful detention is going to happen. In fact, you plan for it to never occur. But are you ready? Do you have the resources behind you and the protection that you need to be able to pay for those expenses when that unexpected does occur?

Tim Crowley (10:51):
To me, there's a financial benefit to this product. I think it's that resource and that network that is almost more valuable and knowing what to do in the unfortunate circumstance that you had an event, you have that comfort that there's a plan in place. There's people to talk to. I know who to call. I don't have to start interviewing resources and third parties.

Chris Arehart (11:09):
The last thing that you want to do as a company in the middle of a threat is start making phone calls out of the phone book of who's going to help you. So here's an interesting example. There was an independent reporter a number of years ago from Canada that went abroad, and she was taken. Her and her partner were taken, and she was a reporter, “stringers” what they call them. You know, they're out there doing reporting work and she was entering into some pretty hairy regions in the Middle East, and ultimately, she was taken and taken for years and years and years, because there was nobody, as a stringer, there was nobody behind her, there was nobody to help her and her partner get out of this situation. So, for years, she was taken and the only thing that brought her home, the Canadian Government couldn't really do anything for her.

They offered some aid, but much like our own government, who famously we all know does not negotiate with terrorists, they don't negotiate with kidnappers. That's the position, right? So, individuals and companies and families, etc., need to protect themselves. They have to have that access and do that negotiation for themselves because they're not going to have somebody come and do it for them. She was taken for a long period of time, and only until finally a local businessman underwrote, literally paid the bills for a professional crisis management team to come in and handle the case. And this was not one that we handled, but it's well known in the press. Her name is Amanda Lindhout. If anyone's interested in the story, she wrote a fantastic book about it in her captivity. Only until a businessman came forward and backed the expenses and connected them with the security service.

Once the security service was involved, the professional negotiations commenced. The people that had taken her said, oh, now you're ready to negotiate. Alright, we're ready to negotiate. And within a small amount of time, I don't want to get it wrong, but it was months, not years, she was freed and on her way home. So, the impact of having access to qualified people is that in the moment, you are not going to be in a position to try to find the people; and some response firms will not respond unless it's insured. What the insurance does is it smooths the path and provides financial stability and backstop for the situation so that in the event that the ransom is lost in transit, they want two of them. They have expenses, legal bills, all of it. The expenses are mounting, and the company and the people that are being paid don't have to sit there and say, well, are you good for this? Do you have the money, Tim?

Tim Crowley (13:53):
Yeah, it's a very powerful story, Chris. I'm sure our listeners, if they didn't before, may have a new and better appreciation for the work that these types of firms do. So taking that into consideration, I think a lot of our listeners now know why they should partner with an insurance company that has the backing of these resources that you were talking about. So going forward, you know, how should companies think about transferring this risk to a qualified insurer such as Chubb?

Chris Arehart (14:19):
Obviously talk to Alliant, talk to a broker that is familiar with this coverage. This is specialty coverage. It's not something that is purchased online or direct from a carrier. It is special coverage. In fact, that's what it often is called so that we don't use the words kidnap ransom or special coverage. That request can be put into a qualified broker such as Alliant that has access to carriers that write this business, including Chubb. There are only a few companies that provide kidnap ransom insurance in the globe and Chubb's one of those largest carriers. Then once you have that broker, have them approach markets such as Chubb, where they are partnered with security partners that you have vetted. So, a little known fact is that every carrier, including Chubb, will allow you to speak with the risk response firm that they work with ahead of time.

So you're not buying blindly. Make sure that you can speak with them and talk with a company representative that has actually negotiated a kidnapping. Far too often, the security firms may put forward sales folks or individuals that are there to sell you one of their services and access to those very small few number of people that have the experience in kidnapping. Those people are hid behind closed doors at the Ackerman Group. We've partnered with them to ensure that those people will be available to speak to any prospective insured at any time. Obviously, during business hours would be appreciated, although they have gotten phone calls in the middle of the night, no joke saying, I'm just testing the line. I want to make sure that it works at 3:00 AM and so I'm here to tell you it does work, but you can test it if you want to, that's fine.

But we want to make sure that you guys are comfortable, the company is comfortable, our customers are comfortable with those resources because those are the people they're calling in their hour of need. So, there should be a fluid, seamless handoff from the company to the risk response firm. They call the hotline, and the first time we hear about it is when it's all done, they work for you. So, you the customer, you're the listener. So, that's what we want you to do is be aware of and be comfortable with the risk response firm that is paired with that insurance. And then finally, ensure that you have the ability to choose a different firm if you wanted to. Not all companies provide this. Chubb is actually fond of sharing that we offer the Ackerman Group as our dedicated response firm. Should an insured be comfortable with another firm and that firm says, yep, we do this work.

They are allowed to and are willing to do the work for our insured, we will insure it. So Chubb means choice. We never want the company to be stuck thinking that they have to use a service provider that they're uncomfortable with. At the end of the day, the vast majority of my customers are very comfortable with the Ackerman Group. They have responded to hundreds and hundreds of cases in those responses. They have an excellent track record, but I won't speak for them. If any customer or listener wants to get on the phone with a qualified risk response firm, speak with you guys, bring it forward, and we'll get you on the phone with an actual person who is former FBI, former CIA, and will tell you the real straight news of how you need to prepare yourself and what's going to happen in the event of a threat or a kidnapping or extortion.

Tim Crowley (18:03):
Impactful stuff. Thank you, Chris. So in closing, I hope that today's podcast helped our listeners to identify and analyze the emerging kidnap and ransom exposures facing companies of all shapes and sizes, both domestically and abroad, and protecting both the company and more importantly, their most important asset being their people. So in order to discuss this topic, further review how to best protect your business, please feel free to contact your Alliant Insurance broker for next steps and further analysis. Thank you for listening and have a tremendous day. Get prepared to be prepared.


Alliant note and disclaimer: This document is designed to provide general information and guidance. Please note that prior to implementation your legal counsel should review all details or policy information. Alliant Insurance Services does not provide legal advice or legal opinions. If a legal opinion is needed, please seek the services of your own legal advisor or ask Alliant Insurance Services for a referral. This document is provided on an “as is” basis without any warranty of any kind. Alliant Insurance Services disclaims any liability for any loss or damage from reliance on this document.