Covering the Risks of the Kidnap Boom

Kevin O'Grady , Editor At Large
13 July 2004
All Africa

As kidnapping grows worldwide, potential victims are insuring their families

KIDNAPPING is a global growth industry, with the success of criminal syndicates in South American countries such as Colombia being rapidly emulated in other parts of the world.

Growing just as fast is the availability of kidnap insurance for companies and individuals and kidnap specialists, who train people in the prevention of kidnappings and conduct ransom negotiations on their behalf.



SA's kidnapping risk has been thrust into the spotlight with the abduction last Friday of Leigh Matthews, the 21-year-old daughter of a Johannesburg businessman.

Johannesburg is no Bogota, and SA's notoriously fuzzy crime statistics make it difficult to see how we compare with the kidnap capital of the world.

Figures kept by the South African Police Service's Crime Information Analysis Centre show that there have been more than 4000 kidnappings a year since 1994, dropping to 3071 in 200203. Compared with Colombia's 3000 a year and the global figure of about 15000, this seems implausibly high.

Risk consultants and insurers say the figure includes domestic abductions and is not a true reflection of the prevalence of kidnap for ransom.

Nonetheless, SA has the thirdhighest rate of kidnapping in Africa, after Nigeria and Somalia, and has been placed in the top 10 in the world by the UK's Control Risk Group.

International risk consulting company Kroll Associates has a kidnap-for-ransom unit set up in response to an "age-old crime that has matured into an established worldwide business".

The unit's head, Donald Palmer, says the crime has gradually spread from central and South America "the home of kidnapping" to other regions where corruption is endemic, law enforcement agencies are poorly trained and ill-equipped, and the judiciary is open to favours or vulnerable to violent retribution.

And although it is not "carved in stone", kidnapping also tends to increase when other crimes become more difficult to commit because of increased security, Palmer says.

Then there is the copy-cat factor, which emerges when kidnapping cases receive media publicity. "People catch on and say, I'll have a go at that'," says Palmer.

The Kroll unit has corporations, high-net-worth individuals and governments as its clients, but is also one of a number of companies that offer trained "respondents" to the holders of kidnap insurance policies.

This is a specialised field of insurance, available more widely in other parts of the world although it is illegal in Colombia than it is in SA.

First developed in response to the kidnapping of aviator Charles Lindbergh's baby in 1932, kidnap insurance has become an established industry, and about $100m a year is now paid in premiums worldwide.

Kidnapping for financial enrichment as opposed to making a political statement or demand accounts for about 90% of all kidnappings, and it is for this crime that insurance companies have tailored their products.

AIG SA is the only insurance company that offers dedicated kidnap insurance in the local market, but other facilities are available through brokers from British insurance giant Lloyd's.

AIG's Penny Randall says a typical policy will include payment for response teams from companies such as Kroll or, in AIG's case, Clayton Consultants. These have specialised knowledge of the methods used by kidnappers, and often of the criminal syndicates , and will assist in ransom negotiations and co-ordinate efforts to get the victim returned safely.

A policy will also cover ransom costs, medical and psychiatric treatment and travel costs and cover for death or dismemberment, Randall says.

Members of the response teams often have a background in the British or US security services, and charge about $2000 a day.

Andrew Minnitt, executive director of corporate risk services at broker Glenrand MIB, says while it is available to individuals on a very limited basis, more and more companies in SA are buying kidnap insurance for their staff.

This is because corporate governance requirements impose a duty on companies to take care of their staff, and also to publish details of their directors' earnings, making it easier for kidnappers to pick their targets.

Minnitt is reluctant to discuss the cost of cover, saying it depends on a range of factors such as net worth and travel patterns.

Another broker, who would not be identified, says the guideline premium on a family policy from Lloyd's is R5500 a year for an individual with assets of R2,5m, with cover limited to R1m.

"They perceive risk to increase the more assets you have, so that would increase to R30000, with a R10m payment limit, for someone with assets worth more than R10m," an employee says.

It is a clandestine business, with the holders of kidnap insurance a closely guarded secret.

To admit to having a policy would be like issuing an open invitation to prospective kidnappers, says Minnitt.