Tales of the hostage negotiators

21 January 2010
Financial Times
James Boxell

Members of the secretive industry that works to free kidnap victims share some tricks of their trade with James Boxell

Donald Palmer is a quiet, unassuming man, which he explains is typical for his profession. For the past 18 years, he has been part of the select band of former law enforcers, soldiers and secret service agents who make their living negotiating the safe return of kidnap victims.

Mr Palmer, who gained his expertise in military intelligence in Northern Ireland, is proud that none of his clients has ended up dead. In spite of his forces background, it is rare that he calls for an armed rescue: a negotiated ransom is always preferred.

"We had one example where a young child had been kidnapped, and we were buying intelligence from a disaffected gang member," Mr Palmer says. "It was obvious the child knew one of her kidnappers, who had worked for the family. She would probably have been killed if a ransom was paid so we sent in a special weapons team. Fortunately, the girl took cover, though both minders were killed. That is obviously traumatic and a huge risk, which is why force is used only as a last resort."

As Somali pirates wage a lucrative campaign of terror off the Horn of Africa and brutal Mexican gangs target the country's wealthiest families, demand for the services of Mr Palmer and his ilk is as strong as ever.

Some within the kidnap negotiation industry - but not all - say kidnappings are on the rise, with an estimated 15,000 incidents reported in 2008. Latin America remains the most dangerous region - with Venezuela currently gaining in notoriety - but Africa, south Asia and the Middle East are catching up.

"It's not explosive growth, but we are clearly seeing an increase in kidnappings," says Armand Gadoury, managing director of Clayton Consultants, a hostage negotiation business owned by Triple Canopy, the US private security company. "And we are seeing more insurance providers looking to get involved."

Clayton operatives have been at the sharp end of negotiations with Somali pirates. "We have been going eyeball-to-eyeball," says Mr Gadoury. "Our own guy has executed a money drop."

The company, which has an exclusive deal to provide "kidnapping and ransom", known as "K&R", to AIG, the US insurer, says it has five times as many cases now as when it started in 2002. Chubb, another insurer, estim-ates its business has risen by 15 to 20 per cent in three years.

The way this secretive industry works is that insurers provide specialist cover to businesses operating in the most lawless countries and to wealthy families seeking protection. The first policy was written in 1932 after the aviator Charles Lindbergh's baby was kidnapped and murdered, but the market mat-ured in the late 1970s and early 1980s after a spate of kidnappings in Colombia.

The insurers have exclusive ties with security companies or bring in individuals such as Mr Palmer, who has just been hired by G4S, the security group, to revamp its kidnapping service. The Insurance Information Institute estimates global premiums for kidnapping and ransom policies are worth $300m (€209m, £184m).

Hiscox, a specialist British insurer, is the biggest provider, claiming to account for about two-thirds of the market. It is tied to Control Risks, a London-based security group. Guillaume Bonnissent, kidnap and ransom underwriter at Hiscox, says his business has expanded modestly over the years, stressing that the market is "not cyclical - there is not a sudden peak one year, despite the headlines".

Countering extortion is an equally important part of the Hiscox business, with Control Risks regularly advising consumer goods companies on how to deal with threats to poison well-known brands with minimal publicity.

Mr Bonnissent suspects the current flurry of interest from rivals in kidnap cover is more to do with other underwriting business drying up than with a long-term market change. "Many do it for a year and give up," he says. "We are in a soft insurance market so there is a lot of spare capacity. People fail to realise that you don't insure this in the same way as a building - a loss may be very high and we are dealing with the lives of people."

Kidnap consultants are reluctant to reveal trade secrets because hostage-takers then use them to drive up ransoms. Indeed, they are unhappy that the sums paid to Somali pirates have been publicised. This week it was disclosed that pirates received as much as $7m for releasing the Maran Cen-taurus, a big inc-rease on the $3m paid for the Saudi-owned Sirius Star last year.

The vast majority of companies working in difficult countries take out insurance but keep it secret for fear of advertising their staff's attractiveness to local gangs. At one point, expatriate oil and gas workers in Nigeria became such popular targets that they were dubbed "ATMs", often changing hands for $250,000. The country remains very risky, although kidnappings dropped after companies stopped sending foreign staff.

Consultants, who can also be hired directly when there is no insurance, usually do not talk to the kidnappers but fly in to give direct advice to emp-loyers of captured staff or families of hostages. Their first priority is to establish "proof of life", asking questions only the hostage could answer, and checking there have been no amputations. "Wise kidnappers won't take a frail hostage," Mr Palmer says.

There is then a process of "nibbling down" the initial cash demand, in case the hostage-takers demand a second ransom, which is a common problem. "But you also need to convince the relatives you are not just a loss adjuster," says Mr Palmer, who adds that it is easier working with companies than families. "This is how this business was first set up, so we need to show we are not reducing demands just to mean a lower policy payout."

As well as ransoms, insurance policies also cover psychological counselling for victims and families, media consultancy on reputation risk and the salary of replacement workers.

The companies say police forces and governments are starting to accept private consultants' methods after recognising they are more likely to keep hostages alive than rescue attempts. Out of every 100 kidnappings, about two or three hostages are killed (after stripping out the distorting effect of Iraq). The average case lasts two or three months.

"Most gangs realise that if they start knocking off hostages, police and the military will clamp down really hard and they'll find it harder to make money," says Mr Palmer.

It is "far worse" dealing with political hostage-takers than with those seeking pure financial gain, says Francisco Quinones, head of crisis res-ponse at Clayton Consultants. Political kidnappings are a problem in the Philippines, Afghanistan, Iraq, Pakistan and India. But he points out that "a lot of political kidnappings are es-sentially financial under the surface".

Those in the profession estimate there are probably no more than 30 people active in ransom negotiation who have more than 10 years' experience. Mr Palmer says if you sat them all together in one room they would share the "same character ticks", with the ability to "show compassion" uppermost. "We genuinely believe in what we are doing," he concludes. "And, of course, the pay is good."

Tips to avoid kidnap

•Do not wear or carry anything with a company name. Make reservations and buy tickets in your name and use a personal credit card. When registering in a hotel, use only your name. Do not identify your company to immigration or customs officials.

•Travel in casual clothes.

•On immigration forms, say the purpose of your visit is to attend a local conference.

•Carry your own luggage and take the next taxi in line.

•Book a hotel room between the third and 10th floors - first and second are accessible to criminals, anything above 10th may not be accessible in case of emergency.

•Avoid leaving a hotel at the same time or taking the same route every day. Do not respond to hotel loudspeaker calls unless you are expecting a call. Source: Clayton Consultants

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