Kidnap and ransom insurance is an area where few firms have a significant foothold. One of those companies is Chubb Group, and their key man in this area is Greg Bangs, vice president and worldwide crime, kidnap/ransom and extortion, and workplace violence expense product manager. He explains the key issues facing the industry currently and what it takes to break in.
What, exactly, does working in kidnap and ransom insurance involve?
I work on the underwriting side of the business and my role is predominantly to develop the strategy and product lines that the Chubb Group of Insurance Companies offers in the area of kidnap and ransom coverage. I assess how Chubb responds to changing market conditions, political instability or rising kidnapping risks within particular countries and develop the pricing strategies for our products based on that information. As in any area of insurance, I work closely with our actuaries on this.
How did you break into it?
When I first came out of university in 1980, I was looking for a position in the finance industry and explored a number of options, both within insurance and investment banking and trading. Insurance is generally perceived as quite a staid and traditional area to work in, but when I discovered kidnap, ransom, political risk and crime insurance, it fascinated me. It was a relatively new area to work in at the time; it was dynamic, exciting and tied to geopolitical situations in exotic parts of the world. That really tipped the balance for me.
Are there any countries where kidnapping and extortion risks are particularly high?
Mexico is number one, and the number of kidnappings has exploded in recent years. Statistics on kidnappings are incredibly hard to source, because the majority go unreported. The latest statistics for 2011 put the number at 5,000 to 7,000 in Mexico, but we’d estimate that the real figure is closer to 10,000 to 12,000.
Why is it such a risk?
The escalation of kidnappings in Mexico is largely tied to drug violence. Kidnapping and extortion provides an extra source of revenue for many of the drug cartels, so others are also branching out into it. It has become another industry for them. In addition, military crackdowns have led to the murders of some key figures in the drug industry, leaving some people to seek other ways to make money. Kidnapping for ransom is a proven and relatively easy option.
How do you decide on whom to insure and how much to charge?
When we receive an application we have to decide whether we can write a policy that makes sense for the client and is also likely to be commercially viable for Chubb. We consider a number of factors that may make individuals or companies a targeted threat such as how high the individual’s or company’s profile is, whether there is a history of kidnapping, the countries that employees travel to or if they work in a contentious industry.
For example, companies that test products on animals – or are even suspected of testing on animals – may be actively targeted by animal rights activists, while firms that manufacture genetically modified food may also be considered a major risk.
What about high-earning professionals, such as those working in the financial sector?
Yes, those individuals may also be at risk. As financial services organisations have moved into developing countries where the risks are high, we’ve seen a significant increase in requests for kidnap and ransom coverage. For example, infrastructure and financing deals are emerging in Iraq, which is obviously coming out of a sustained period of strife and instability.
There’s also Latin America, which is an increasingly attractive area for investment banks and capital markets firms. I’ve already mentioned Mexico, but Venezuela is number two on the league tables, with around 2,000 recorded kidnappings in 2011, and it’s growing at an alarming rate because of economic troubles in the country. Brazil is also a key problem area for ‘express kidnapping’ where individuals are held up at gun point or carjacked – usually after dinner at around 11.55pm – and forced to withdraw their daily allowance over two days from an ATM. These express kidnappings are also becoming increasingly violent, with beatings and rape more prevalent.
Do you think it’s possible for people in other parts of insurance to move into K&R insurance? What tips can you give?
Absolutely. The skills are very similar – you need to be bright, inquisitive and have the analytical abilities demanded of any underwriting role. The key is to track trends and understand the geopolitical landscape in various parts of the world and the impact they can have on the kidnap and ransom insurance business.
For example, the Sahel region in Sub-Saharan Africa may not have a large frequency of kidnappings, but the severity of the cases is greater. Most ransoms typically average $2m, but in this region it’s more like $50m-$60m – or in one case it was as high as $90m. Reading up on these sorts of trends can really help your case for a move to kidnap and ransom insurance.