Kidnapping and extortion: how does insurance work?

(Well Covered)


While relatively rare in Australia, when someone is kidnapped or detained, it hits the headlines for all the wrong reasons.

For instance, few will forget the so-called ‘Mosman bomb hoax’ in 2011, when an apparent collar bomb and letter demanding money was placed around school girl Madeleine Pulver’s neck. The man responsible carried out the crime to intimidate the victim’s father. The bomb was later found to be fake.

While this is an extreme example, in the past, there have been other instances of Australian executives being extorted or kidnapped in remote parts of the world. One source estimates there are about 15,000 kidnappings every year, with about US$500 million paid out in ransoms.

Many Australian businesses, for instance mining and resources, engineering and consulting firms, have staff either living in high-risk locations overseas or travelling to high-risk locations. It’s important for these firms to have kidnapping and extortion cover in place to help protect staff and so in the event the worst happens, they have resources to secure a positive outcome.

This type of insurance can provide protection against financial losses incurred when someone covered by the policy is kidnapped, extorted or illegally detained, either in Australia or overseas. It gives businesses with staff located in risky places peace of mind their staff will in the best possible hands should they be held against their will or extorted.

Steadfast Group broker technical manager Michael White explains kidnap and ransom insurance is typically an add-on to management liability insurance. “Policies do cover the cost of a ransom. But what you are really buying when you take out this insurance is access to people whose expertise is being able to deal with the people who have kidnapped you to try to get you released, which is a highly-specialised skill.”

So if you’re taking out kidnapping and ransom insurance, be sure to check how much cover the policy includes for specialised negotiators. It’s also a good idea to do some due diligence on the consultants the insurer employs to negotiate the release of hostages.

Find out about their experience successfully negotiating the release of hostages and also whether they have been able to secure the release of hostages without the need to pay a ransom.

“Some policies will have exclusions for the very countries in which it’s advisable to have kidnapping insurance”

Additionally, some policies will have exclusions for the very countries in which it’s advisable to have kidnapping insurance. These may include hot spots such as Algeria, Colombia, Georgia, India, Indonesia, Iraq, Israel, Malaysia, Pakistan, Peru, the Philippines, Russia, Sri Lanka, Tajikistan, Haiti and Iran.

“If you’re taking out this type of insurance, make sure the countries where staff are located or travelling are covered by the policy,” White explains.

The Australian federal government’s Smart Traveller web site has lots of information about how to keep staff safe while they are working abroad. It recommends taking steps such as researching the destination, having a detailed emergency response plan and putting in place personal security to ensure staff are protected no matter where they are working.

Businesses have a duty of care to ensure their staff are safe at all times. If you have staff located overseas, ensure you have put in place steps to reduce the risks they face and support them to come home safe every day.

Important note:

This information is to assist you in understanding some of the terms, implications and common considerations with professional indemnity insurance. It is not complete, so please request full details from your Steadfast insurance broker as to whether professional indemnity insurance is appropriate for you.

Important notice – Steadfast Group Limited ABN 98 073 659 677 and Steadfast Network Brokers

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.


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