Ransom Insurance For A More Dangerous World

As U.S. companies expand their business to developing countries in Latin America and the former Soviet bloc, traveling executives have more to worry about than language differences and currency translation. Unfortunately, kidnappings and extortion are on the rise in some of these places.

A small group of insurers, namely Chubb, AIG, and Lloyd's of London, have long offered policies to entrepreneurs and executives that cover ransom demands from kidnappers, both in the U.S. and abroad. But now, insurers have begun to broaden the coverage to include such extras as legal and psychiatric fees and compensation for loss of trade secrets and product tampering. Some of the new policies also reimburse expenses needed to evacuate a country rocked by political instability. Insurance companies are even offering to train executives on how to avoid being kidnapped.

Depending on the extent of the coverage, premiums can run from $1,000 to $100,000 per year. Usually, companies pick up the tab, but individuals can also buy the insurance. Basic policies cover ransom payments, the hostage's salary for the period in which he or she is held, and costs associated with hiring a crisis-consulting firm that advises you in the event of a kidnapping. Coverage for accidental death and dismemberment can cost extra, and the premium may vary depending on which countries you visit frequently. (You would pay more if you traveled extensively to Latin America, for example, than to Europe or Japan.)

NEGOTIATOR FEES. From Chubb, insuring one person for payment of a $10 million ransom could run as low as $1,000 a year, estimates A. Quentin Orza, a Chubb vice-president. But it could also rise to $25,000 for a highly visible person who has had threats in the past. AIG's fully loaded no-deductible policy will cover expenses up to $50 million for everything from medical treatment and interpreters to rest and rehabilitation. It offers an evacuation rider that picks up an additional $15 million. AIG would not reveal premium costs.

Anyone buying kidnap and ransom insurance should pay particularly close attention to the policy language. If it doesn't specify that a certain type of coverage is included, such as negotiator or psychiatric fees, you may be out of luck when you submit a claim. Also note that it is illegal to purchase the coverage in Germany and Colombia, where governments believe such policies only goad terrorists into action. So if you expect to be transferred to one of those countries, buy the insurance before you move.

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