Kidnap Ransom & Extortion

Insurance

Presented by Greg Bangs

Vice President
Chubb Specialty Insurance
Executive Protection Practice
 Agenda

• Kidnappings by Country
• Loss Examples
• The Piracy Problem
• Hijacking Response
• Policy Overview
• Optional Coverages
• Underwriting Considerations
• Competition

Executive Protection Practice

 Kidnappings by Country
• Mexico - 5,000
• Brazil – 1, 000
• Gulf of Aden – 815
• Venezuela - 537
• Colombia - 465
• Nigeria – 400
• Haiti – 300
• India – 200
• Iraq - 100
• Former Soviet Union – 100

Executive Protection Practice

 K/R Losses
• Colombia
– Two executives from Novartis were Kidnapped in Bogota as they
drove their armored car from a plant to a reception. There were
no signs of a struggle leading investigators to suspect that the
abductors were police officers, real or bogus. Victims were
released one year later.

• Ecuador
– Eight employees of Schlumberger, Helmerich and Payne and
Erickson Air Crane were abducted along the Colombian border.
$80 million was demanded. $13 million was paid.

Executive Protection Practice

 K/R Losses
• Venezuela
– Richard Boulton was abducted when he landed his plane at a
private airstrip. A major concern with this abduction is that a
paramilitary group conducted the abduction in the center of
Venezuela. The demand was estimated to be at $30 million.

• Media Company
– Has been the target of an extortion threat for several years. Most
recently threats were made against the life of an employee and
we paid approximately $400,000 for added security.

Executive Protection Practice

 The Piracy Problem

• Gulf of Aden:
– 111 ships were attacked by pirates in 2008, a
200% increase over 2007
– 42 ships held for ransom in 2008, 25 to date in
2009
– At least 16 vessels and more than 250 crewmen
remain in the hands of pirates
– Most paid ransoms were in the US$100K to
US$3 million range per ship

Executive Protection Practice

 The Piracy Problem

• Gulf of Aden:
– More than 1,200 Somalis estimated to be
involved in piracy and associated activities
– Two major pirate clans – north and south
– Many ransom negotiations take three
months or more

Executive Protection Practice

 The Piracy Problem

• Gulf of Aden – loss examples:

– Sirius Star: Saudi supertanker carrying oil valued
at US$ 100 million. US$ 3 million ransom paid.
– MV Faina: Ukrainian cargo ship carrying
weaponry including 33 tanks. US$ 3.2 million
ransom paid.
– Blue Star: Egyptian cargo vessel carrying
fertilizer. Ransom paid was “more than US$ 3
million”.

Executive Protection Practice

 The Piracy Problem

• Somalia – statistics:
– No effective government since 1991
– It is estimated that nearly half of the population is starving
– Foreign Policy magazine ranked Somalia as the most
unstable country in the world in 2008
– 1.3 million people have been displaced as a result of
instability
– Illegal fishing by foreign trawlers has depleted local waters,
destroying the livelihood of Somali fishermen. Illegal
dumping of toxic waste has exacerbated the problem.

Executive Protection Practice

 Hijacking Response

• Security Consultants / Negotiators:

– Essential to have immediate access to a
professional security consultant who can respond
24/7, anywhere in the world
– Chubb works with The Ackerman Group, one of
the world’s pre-eminent security firms
– The Ackerman Group has offices in six countries,
and is staffed by former CIA, FBI, Special Forces,
French Foreign Legion, Royal Hong Kong Police
etc.

Executive Protection Practice

 Hijacking Response

• The Ackerman Group:

– Responds by deploying a team of two consultants to the
company HQ to conduct negotiations with the pirates.
Negotiations take place via ship’s radio and are usually
conducted in English.
– Negotiates to secure the release of the crew and vessel as
quickly as possible
– Makes recommendations as to negotiating strategy and
delivery arrangements, but the company retains decision-
making authority. Chubb is not involved in any way in the
negotiating process.

Executive Protection Practice

 Hijacking Response

• The Ackerman Group:

– One consultant remains at company HQ for the
duration of the hijacking. The second consultant
travels to the city used to stage the ransom
delivery.
– A ransom protection team flies the ransom from
the city at which it is made available to Ackerman
Group to the staging city
– The negotiator constantly inquires about the
health of the crew and arranges to drop medical
and food supplies to the vessel as required

Executive Protection Practice

 Kidnap Ransom & Extortion
Coverage
• Insuring Clauses:
– Kidnapping and Extortion Threat Coverage
– Custody Coverage
– Expense Coverage
– Accidental Loss Coverage
– Legal Liability Costs Coverage
– Optional Emergency Political Repatriation Coverage

Executive Protection Practice

 Kidnapping & Extortion Threat
• Reimbursement to the Insured Organization
• Kidnapping includes demands against an Insured
or an Insured Person
– Insured Person refers to:
» Any Employee
» Any relative of an Employee

Executive Protection Practice

 Kidnapping & Extortion Threat
• Insured Person refers to:
– A legal resident in the home of an Employee or a guest while in
the home of an Employee
– Any customer or guest of an Insured Organization while on the
Premises of such Insured Organization

Executive Protection Practice

 Kidnapping & Extortion Threat
• Insured Person has been expanded to include:
– Anyone employed in the household of an Employee while in the
home of such Employee
– Any customer or guest of an Insured Organization while travelling
in a vehicle with an Employee
– Anyone temporarily retained by an Insured Organization to deliver
a ransom or extortion payment

Executive Protection Practice

 Kidnapping & Extortion Threat
• Extortion Threat includes threats to:
– Commit a Kidnapping or do bodily harm
– Damage, Destroy or Contaminate an Insured Organizations
Property
– Disseminate, Divulge or Utilize Proprietary Information
– Disseminate or make public Negative Information regarding
Merchandise
– Adulterate or destroy any Computer System by a Computer
Violation

Executive Protection Practice

 Custody Coverage
• Insures a ransom or extortion payment while being
held or conveyed by any person authorized by the
Insured Organization to have custody of the funds.
• There is no restriction relative to being On
Premises or In Transit

Executive Protection Practice

 Expense Coverage
• Full expense coverage is triggered by:
– A Covered Kidnapping
– A Covered Extortion Threat or
– Hijacking
– Political Threat
– Wrongful Detention

Executive Protection Practice

 Expense Coverage
• Expenses are defined to include:
– Security Consultant Fees
– Public Relation Fees
– Travel and Accommodations of Insured Persons
– Independent Legal advice
– Security Guard Services

Executive Protection Practice

 Expense Coverage
• Expenses are defined to include:
– Forensic Analysts
– Assessment of an Extortion Threat or Political Threat
– Interest on a loan taken by the Insured Organization
– Rewards paid by the Insured Organization
– Salary of the Victim and of the Replacement worker (Kidnapping,
Hijacking or Wrongful Detention)

Executive Protection Practice

 Expense Coverage
• Expenses are defined to include:
– Consequential Personal Financial Loss
– Medical, Cosmetic, Psychiatric, and dental expenses
– 30 days of R&R incurred within 12 months of the release of the
Insured Person
– Recall Expense for an extortion threat to contaminate
merchandise
– Other reasonable expenses with prior approval

Executive Protection Practice

 Accidental Loss Coverage
• The Benefit Amount for loss of life is paid to the
insured persons beneficiary
– Order of payments when there is no beneficiary
» Spouse or domestic partner
» equal share to children
» equal shares to parents
» equal shares to siblings or
» to the estate

Executive Protection Practice

 Legal Liability Coverage
• Provides Defense and Indemnity for a suit by an
Insured Person or their estate:
– Alleging negligence in hostage retrieval in a covered Kidnapping
– Alleging negligence in preventing a covered Kidnapping
– for any extortion attempt to do bodily harm

Executive Protection Practice

 Emergency Political Repatriation
• Optional Emergency Political Repatriation means
the return of an I.P to the Resident Country
necessitated by:
– An official of the Resident Country or Temporary Resident Country
recommending they leave the Temporary Resident Country
– An I.P. being expelled or declared persona non grata by the
Temporary Resident Country
– the seizure, confiscation or expropriation of property, plant and
equipment

Executive Protection Practice

Emergency Political Repatriation
• Repatriation Expenses:
• Include reasonable fees and expenses:
– for travel to the nearest place of safety or to the resident
country;
– for accommodations while in transit;
– for salary of an employee who is the subject of an
emergency political repatriation;

Executive Protection Practice

Optional Coverage Endorsements

• Business Income Coverage

• Threat Response Expense Coverage
• Corporate Child Abduction

Executive Protection Practice

 Exclusions

• Applicable to all Insuring Clauses:

– Loss resulting from fraud by an I.P. if the I.O. does not make a
reasonable effort to determine that the loss is genuine
– Payments surrendered by an I.P. are excluded unless the I.O.
agrees that it is on their behalf

Executive Protection Practice

 Exclusions

• Applicable to all Insuring Clauses:

– For Robbery off premises
– For surrendering funds on the premises

Executive Protection Practice

 Exclusions
• For Recall Expense:
• The value of recalled merchandise is either excluded or sub-
limited
• Recall for product defects is excluded unless such product is
recalled due to an Extortion

Executive Protection Practice

 Exclusions
• For Wrongful Detention & Political Threat:
– for violations of criminal law by an insured if such violation is a
violation of criminal law in an insured’s Resident Country; Host
Country
– Failure of an Insured to maintain proper work documents or
permits

Executive Protection Practice

 Exclusions

• For Emergency Political Repatriation:

– For Violation by the I.O. or I.P. of laws in the country from which
the I.P. is repatriated
– Due to Failure to maintain proper work documents or permits
– Failing to honor a contract or maintain a license

Executive Protection Practice

Underwriting Considerations
• Nature of Business
• Details of vessels and crew to be covered
• Number of transits through high risk areas
• Details of security precautions taken
• Total Revenue
• Employees
• Foreign Travel & Locations
• Loss Experience

Executive Protection Practice

 Industry Analysis

• Shipping and oilfield/energy services

• Telecommunications, Mining
• Media, - T.V., Magazines, Newspapers
• Genetic Engineering, Controversial Companies
• Food and Drug Manufacturers
• Services - legal, advertising, engineering

Executive Protection Practice

 K/R Competition
• Employee or Stringer?
• Chubb - The Ackerman Group
• AIG - Clayton Associates (Triple Canopy)
• PIA - Corporate Risk Intl.
• Hiscox - Control Risks
• Travelers – ASI
• ACE – Neil Young Associates (Armor Group)
• Great American – Control Risks

Executive Protection Practice

KR&E: Versicherungslösungen der Chubb
KR&E Broker Academy 2009

Karen Bühnemann, KR&E Manager Continental Europe, CSI

We are designed to be different. We are Chubb Insurance.

 KR&E 2006 ChubbCrisisControl
Versicherte Ereignisse:

– Entführung

– Verkehrsmittelentführung

– Widerrechtliche Freiheitsberaubung

– Erpressung

– Cybererpressung

– Politische Drohung

We are designed to be different. We are Chubb Insurance.

 KR&E 2006 ChubbCrisisControl
Versicherte Schäden:

– Ersatz von Löse- und Erpressungsgeldzahlungen

– Ersatz von Verlust bei Übergabe des Lösegeldes

– Umfassende Übernahme von Kosten (18 Unterpunkte)

– Übernahme von Schadenersatzleistungen (inkl. Abwehrkosten)

– Entschädigung bei Personenschäden

We are designed to be different. We are Chubb Insurance.

 KR&E 2006 ChubbCrisisControl
Mögliche Deckungserweiterungen (Beispiele):

– Bedrohungsabwehrkosten

– Politisch bedingte Eilrückführung

– Betriebsunterbrechung aufgrund von Entführung/Erpressung

– Und: Wir bieten bis zu 20% Prämienrückerstattung der

ersten Jahresprämie im Falle der präventiven
Krisenberatung durch anerkannten Sicherheitsberater
(Ackerman Group oder Result Group)

We are designed to be different. We are Chubb Insurance.

 Ihre Ansprechpartnerin zum Thema KR&E:

Karen Buehnemann Ass. iur.

Senior Underwriter and K&R Manager Continental Europe
Tel: +49 211 8773 464 | Fax: +49 211 8773 466
Mobile: +49 175 24822 16
Email: KBuehnemann@chubb.com
Chubb Insurance Company of Europe SE
Grafenberger Allee 295, 40237 Düsseldorf / Germany

We are designed to be different. We are Chubb Insurance.