The Economics Of Kidnapping

August 30, 2014 in Daily Bulletin

Derek Kravitz and Colm O’Molloy took a look at the murky world of hostage negotiations:

  • “Kidnap and Ransom” (K&R) insurance has become a booming industry as companies increasingly insure their executives in conflict ridden areas.
  • A periodic premium is paid, and if a kidnapping happens, the ransom is paid by the insurer.
  • Total premiums have risen from $50 million ten years ago to at least $250 million today.
  • The average ransom paid is around $3.75 million. Premiums can be as high as $1,500 per employee, per day.
  • Exact numbers are difficult to find as those ransomed typically sign non-disclosure agreements in an attempt to prevent other groups from being encouraged to try kidnappings.
  • The practice is controversial. According to one estimate Al-Qaeda and other groups have made more than $125 million through ransom payments to fund their operations.
  • Yet the practice continues to grow – big news pieces about piracy, terrorist, and other risks has pushed companies to purchase more of the policies.
  • Kidnappings used to mostly be associated with Latin America. But kidnappings in the Middle East have grown from 4% of the world total to 17% in the last decade.

Read about the business, the “kidnap reports” that organizations can buy, the details of one K&R insurer, and more over here.

Source: The Guardian